Friday, April 29, 2022

Friday Closing Dairy Market Update - Income Over Feed Rises to $11.55

MILK

Class III milk futures were lower for the week in all contracts except for July. This was a reflection of an overall decline of cheese and dry whey prices. The week was not without volatility, but the result was a bit disappointing. Class IV futures closed steady to higher across the board Friday with prices generally mixed for the week. The market seems to be comfortable at the current price levels, while remaining supported. There is little concern of significant pressure on milk prices at present, but there is some concern over market potential if milk production increases and cow numbers increase. Of course, it will not make a difference if demand remains strong or increases. USDA released the March Agricultural Prices report, which showed an increase in the average corn price from February of $0.46 per bushel and a price of $6.56. The premium/supreme hay price averaged $269 per ton, up $3 per ton from February. The all-milk price averaged $25.90 per cwt, up $1.20 from February. The soybean meal price averaged $493.98 per ton, up $13.02 per ton from the previous month. This resulted in an income-over-feed price of $11.55 compared to $10.98 for February.

AVERAGE CLASS III PRICES

3 Month: $24.45
6 Month: $24.28
9 Month: $23.86
12 Month: $23.22

CHEESE

For the week, block cheese price declined 2.25 cents with three loads traded. Barrel cheese price declined 3 cents with 12 loads traded. Dry whey declined 3 cents with 10 loads traded. Business is being done without a lot of fanfare. Prices seem to be moving in a sideways pattern. Demand is good but there is some concern over higher prices having an impact on overall demand as time moves forward. Food prices in general are increasing, which will affect what consumers will purchase.

BUTTER

For the week, butter increased 0.75 cent with nine loads traded. Grade A nonfat dry milk price remained unchanged with eight loads traded. Churning remains active with sufficient cream supply for production. Ice cream production is increasing, utilizing more cream, but there remains sufficient supply available for demand. The increase of price over the past two days was a matter of buyers taking advantage of the low price and not a change in trend.

OUTSIDE MARKETS SUMMARY

May corn gained 2.25 cents, closing at $8.1825. May soybeans gained 1.75 cents, ending at $17.0825, with May soybean meal up $0.30 per ton, closing at $440.50. May wheat fell 30.25 cents, closing at $10.4375. June live cattle declined $1.25, closing at $132.65. June crude oil declined $0.67, ending at $104.69 per barrel. The Dow fell 939 points, closing at 32,977, while the NASDAQ fell 537 points, closing at 12,335.




Friday Midday Dairy Market Summary - Class III Milk Futures Diverge

OUTSIDE MARKETS SUMMARY:

CORN: 5 Higher
SOYBEANS: 9 Higher
SOYBEAN MEAL: $0.50 Higher
LIVE CATTLE: $1.30 Lower
DOW JONES: 492 Points Lower
NASDAQ: 315 Points Lower
CRUDE OIL: $0.36 Higher

MIDDAY MARKET UPDATE:

Only a seller of blocks showed up during spot trading Friday who offered lower, resulting in a loss of a penny closing at $2.37. Barrel cheese price remained unchanged with no interest from buyers or sellers. Dry whey price increased 3 cents, closing at 40.50 cents with one load traded. Butter price increased 4 cents, closing at $2.6750 with six loads traded. There were unfilled bids for four loads remaining at the close, suggesting price may increase further next week. Grade A nonfat dry milk price gained 1.50 cents, ending at $1.7550 with three loads traded. Class III futures are mixed, contracts through October unchanged to higher while later contracts post losses. Significant pressure is on 2023 contracts with February through June showing double-digit losses. Class IV futures are mixed from 14 cents lower to 16 cents higher. Butter futures are 1.45 cents lower to 2.00 cents higher. Dry whey futures are 1.65 cents lower to 0.35 cent higher. USDA will release the March Agricultural Prices report Friday providing the average prices used in the calculation of income over feed for the Dairy Margin Coverage program. The average soybean meal price may not be available until Monday.




Friday Morning Dairy Market Update - Traders Wait for Further Direction

OPENING CALLS:

Class III Milk Futures: Mixed
Class IV Milk Futures: Steady to 5 Higher
Butter Futures: Steady to 1 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures: Mixed
Soybean Futures: 12 to 20 Higher
Soybean Meal Futures: $3 to $5 Higher
Wheat Futures: 8 to 12 Higher

MILK:

The rebound of milk futures Thursday did not carry through overnight. The strength of block cheese without barrels does keeps traders cautious. It is unclear whether price has uncovered a level at which buyers will step up and be more aggressive or whether Thursday was just a matter of the need to fill orders. The milk market seems to be somewhat balanced with sufficient supply for bottling and manufacturing. Milk production continues to improve seasonally. Increasing cow numbers and production per cow may eventually move milk production near unchanged from last year. USDA will release the March Agricultural Prices report Friday, providing most of the price used in the calculation of income over feed for the Dairy Margin Coverage program. There was a change in the reporting of the average soybean meal price for the month last time, which resulted in the inability to report the income over feed price until the following day. I have not been able to find any place to find the average soybean meal price any earlier than posted by the Farm Service Agency.

CHEESE:

There is a strong possibility of cheese prices moving higher Friday during spot trading. Sellers may hold back a bit to see how aggressive buyers might be. However, current supply and demand seems balanced, which may leave buyers and sellers doing business near current price levels for the time being.

BUTTER:

Price may have limited upside potential, as inventory is growing while current demand is being satisfied. Retail sales have slowed a bit while food service industry demand remains strong. Export interest is good due to price being attractive to international buyers. Further strength is anticipated in the cash market Friday as buyers take advantage of the lower price.



Thursday, April 28, 2022

Thursday Closing Dairy Market Update - Herd Decline Slowest Over Past Four Years

MILK

Milk futures were able to rebound Thursday after two days of selling. Strength in block cheese and butter resulted in short-covering and new buying interest with traders anticipating a rebound in prices to some extent. The increase is not expected to last very long with prices likely remaining in a sideways range. It may be difficult for Class III futures to move back above $25 due to the weakness of dry whey. The decline of dairy herds in 2021 was at the slowest rate in four years. There were 1,794 dairy herds that stopped production last year. Over the past 20 years, the average decline of dairy herds has been 2,300 per year. However, all those cows did not go to slaughter last year, with many moving to other farms with the average dairy herd size totaling 316 head. The state with the largest average herd size was New Mexico with 2,752 head. The state with the smallest average herd size was Pennsylvania with 93 cows per herd. Milk production last year reached a record high of 226.0 billion pounds. Cow number began to decline during the second half of last year but may begin to rebuild again as indicated by the two recent milk production reports.

AVERAGE CLASS III PRICES

3 Month: $24.54
6 Month: $24.30
9 Month: $23.88
12 Month: $23.27

CHEESE

Demand for cheese remains strong both domestically and internationally. There are reports that buyers form Asia are purchasing loads of cheese to be shipped in the fourth quarter. That has been some of the reason cheese buyers have been purchasing ahead rather than just for near-term needs. I have reported numerous times that buyers have been purchasing much further ahead than usual in the attempt to increase ownership for anticipated demand as well as to prepare to fill orders that have been placed much more in advance than usual. End users are allowing more time to obtain supply by ordering earlier. This may reduce aggressive demand later in the year.

BUTTER

Churns have sufficient cream available for production. There is more demand from ice cream production, but with many plants suffering from the lack of employees, the balance has been good. Butter is being produced to meet demand, while at the same time, inventory is building seasonally. Export demand remains strong.

OUTSIDE MARKETS SUMMARY

May corn closed 0.50 cent higher at $8.16. May soybeans fell 20 cents, ending at $17.0650, with May soybean meal down $10.80 per ton, closing at $440.20. May wheat declined 6 cents, closing at $10.74. June live cattle declined $1.12, closing at $133.90. June crude oil gained $3.34, closing at $105.36 per barrel. The Dow jumped 614 points, closing at 33,916, while the NASDAQ gained 383 points, closing at 12,872.




Thursday Midday Dairy Market Summary - Cheese and Butter Prices Bounce

OUTSIDE MARKETS SUMMARY:

CORN: 4 Higher
SOYBEANS: 17 Lower
SOYBEAN MEAL: $9.50 Lower
LIVE CATTLE: $0.50 Higher
DOW JONES: 579 Points Higher
NASDAQ: 347 Points Higher
CRUDE OIL: $2.82 Higher

MIDDAY MARKET UPDATE:

Block cheese price gained 4 cents, closing at $2.38 with one load traded. Block cheese has bounced from the bottom of the trading range, keeping the market sideways. Barrel cheese price remained unchanged at $2.34 with three loads traded. Dry whey price remained unchanged at 57.50 cents with no loads traded. Butter price increased 2 cents, closing at $2.6350 with two loads traded. Grade A nonfat dry milk price gained 1.25 cents, closing at $1.74 with two loads traded. This provided the catalyst to push milk futures higher. Class III futures are 8 to 45 cents higher in 2022 contracts and unchanged to 11 cents lower in the first half of 2023. Class IV futures are 11 cents lower to 30 cents higher. Butter futures are 0.25 to 2.47 cents higher. Dry whey futures are steady to 3.00 cents higher.




Fluid Milk and Cream - Western U.S. Report 17

In California milk production is steady to higher. Contacts report that while volumes are up     over the previous weeks, they remain below production levels this time last year. Some     processors in the state are, reportedly, unable to utilize additional volumes of available     milk, due to labor shortages. Some processors in the state report that nearby states, with     lighter milk production, are looking for loads to meet current market demands. Shortages of     available tankers and truck drivers are limiting the ability of some processors from     fulfilling these out of state orders. Demand is steady across all Classes. 
Warmer weather in Arizona has caused milk production to decline this week. Milk output is, reportedly, down year over year. Processing plants in the region are pulling in volumes of milk from other nearby states. Demand for Class I and II is steady. 
Milk production in New Mexico is steady this week, though some producers in the area say that overall output is down year over year. Some additional loads of milk have become available in the state due to unplanned down time. Processors report that they can relocate these loads to nearby balancing operations, and some say they have moved loads to nearby states with tighter milk availability. Class II demand is steady, while Class I demand is trending higher. 
Farm level milk production is increasing in the Pacific Northwest. Contacts say that improving weather in the area is increasing cow comfort. Milk is available, allowing processing facilities to run busy schedules. Demand for Class I and III is steady. 
In the mountain states of Idaho, Utah, and Colorado milk production is trending higher. Labor shortages in the area are, reportedly, contributing to some unplanned downtime at plants in the area. Milk loads are plentiful in the area, and loads are being actively sold on the spot market. Stakeholders say that loads are currently being sold from $3 to $5 under Class IV. Stakeholders say that they are moving loads of milk to areas with tighter supplies. Across all Classes, demand is steady.
Condensed skim contracts are steady, in the West. Stakeholders say that overall demand for     condensed skim has been strong for the last few weeks. Demand for cream is steady. Ice cream     and butter makers are running active schedules and pulling at regional supplies. Some     purchasers from other regions are, reportedly, looking to the West for supplies to meet     current production needs. Stakeholders say that limited tanker availability is causing them     to focus their cream sales on local customers. Western cream multiples are unchanged this     week.

     Western U.S., F.O.B. Cream
     Multiples Range - All Classes:               1.0000 - 1.3000



Thursday Morning Dairy Market Update - Price Weakness Continues

OPENING CALLS:

Class III Milk Futures: 7 to 15 Lower
Class IV Milk Futures: Mixed
Butter Futures: Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures: 4 to 7 Higher
Soybean Futures: 1 to 4 Lower
Soybean Meal Futures: Steady to $1 Higher
Wheat Futures: 8 to 11 Higher

MILK:

Increased corn price should have an impact on milk prices. Historically, there is a strong correlation between the two. However, they do not move in tandem with some lag times or lead times as prices move throughout the year. A lot of price potential will be determined by planting progress and the number of acres planted. Then, it will be up to the growing season. The other difference might be the level of forward contracting of feed that may have been done by farmers. It seems there is a desire to increase cow numbers again after a period of liquidation. This should keep milk available for bottling and manufacturing as the year progresses. Most of the producers I speak with indicate their cows are milking well and have no plans of slowing down. Overnight milk futures indicate further pressure will be seen until spot trading provides direction.

CHEESE:

Cheese prices seem to have established a sideways range. Price resistance may have been reached with buyer interest showing up on price dips. Buyers have been increasing ownership of production for later in the year resulting in less need to chase the market. Cheese production is steady, and demand remains good.

BUTTER:

Price has been trending lower and has not yet been able to uncover a level of support. Weakness should be limited, however, but the level at which buyers will be more aggressive is uncertain. As long as sellers continue to offer supply to the spot market, buyers will continue to purchase on weakness. Churning is active with cream supply less abundant than it has been.



Wednesday, April 27, 2022

Wednesday Closing Dairy Market Update - Milk Production Increases Seasonally

MILK

Milk production continues to increase as the weather warms. Planting delays abound, which is causing concern for the grain markets. Planting will increase rapidly as the ground dries out and temperatures increase. Class I demand is good with schools in session. Demand is in good balance with supply. Milk continues to move to areas that need it for manufacturing. There remain some issues with hauling milk and products, which results in some delay, but that is being overcome, for the most part. Lack of employees at bottling and manufacturing plants remains an issue, sometimes resulting in the diverting of milk to other plants. Class III milk futures are carving out a wide sideways trading range. With the weakness of dry whey, it may be more difficult to reach back to the highs that have been established over the past month. Class III futures posted significant losses Wednesday with Class IV futures mixed. Gains were seen in closer months due to the increase of nonfat dry milk, while losses were seen in deferred months due to butter weakness.

Average Class III Prices

3 Month: $24.30
6 Month: $24.04
9 Month: $23.65
12 Month: $23.11

CHEESE

Cheese supply is balanced. Demand remains strong with a few plants indicating that they have some difficulty filling curd orders. It seems that much of this may be due to a lack of employees rather than a tight milk supply. The selling pressure on cheese is not expected to continue for any length of time, but neither are prices expected to move to new highs anytime soon.

BUTTER

Buyers see no need to be aggressive, as butter is available. Purchases are continuing to be made for later in the year at lower prices. This has reduced the concern over tightening supply as the year progresses. Retail demand has shown some sign of slowing, resulting in less robust orders. Foodservice demand is steady but may slow if inflation continues to push prices for goods and services higher.

OUTSIDE MARKETS SUMMARY

May corn jumped 12.25 cents, ending at $8.1550. May soybeans jumped 21.25 cents, ending at $17.2650, with May soybean meal up $6.20 per ton, closing at $451. April live cattle declined $1.50, ending at $138.50. June crude oil gained $0.32, closing at $102.02 per barrel. The Dow gained 62 points, closing at 33,302, while the NASDAQ declined 2 points, closing at 12,489.




Wednesday Midday Dairy Market Summary - Cheese, Butter Prices Decline

OUTSIDE MARKETS SUMMARY:

CORN: 14 Higher
SOYBEANS: 17 Higher
SOYBEAN MEAL: $6.60 Higher
LIVE CATTLE: $0.55 Lower
DOW JONES: 256 Points Higher
NASDAQ: 81 Points Higher
CRUDE OIL: $0.76 Lower

MIDDAY MARKET UPDATE:

Block cheese price declined 2.50 cents, closing at $2.34 with no loads traded. Barrel cheese price declined 4 cents, closing at $2.34 also with no loads traded. There was only one offer posted for blocks and two offers posted for barrels at the close of spot trading. Dry whey price remained unchanged at 57.50 with no loads traded. There was an unfilled bid for a load below the market. Butter price declined 3.50 cents, closing at $2.6150 with one load traded. Price has not been at this level since Feb. 25. Grade A nonfat dry milk price increased 2 cents, closing at $1.7275 with two loads traded. Class III futures are unchanged to 53 cents lower with May posting the greatest loss. Class IV futures are 26 cents lower to 9 cents higher. Butter futures are 0.77 to 3.50 cents lower. Dry whey futures are 1.00 to 2.70 lower.




Wednesday Morning Dairy Market Update - Traders Hesitant to Pick a Direction

OPENING CALLS:

Class III Milk Futures: Mixed
Class IV Milk Futures: Mixed
Butter Futures: Steady to 1 Lower

OUTSIDE MARKET OPENING CALLS:

Corn Futures: Mixed
Soybean Futures: 10 to 15 Higher
Soybean Meal Futures: Mixed
Wheat Futures: 7 to 10 Lower

MILK:

Milk futures suffered a blow Tuesday with most spot categories in the cash market lower. The higher barrel price provided little support due to it falling back from the highs. The trend on the March Milk Production report indicates farmers are increasing cow numbers. There is a desire to increase production to take advantage of higher milk prices. A positive cash flow is being realized despite a higher cost of production on many farms. This trend should ensure sufficient milk supply through much of the year. Trading is expected to be light prior to spot trading with traders not likely to pick a direction.

CHEESE:

Buyers of barrel cheese may be a bit hesitant during spot trading, waiting to see if the late selling pressure Tuesday will carry through Wednesday. Spot prices may be choppy as buyers and sellers take care of business in a somewhat balanced market. Inventory has not been growing, but there is sufficient supply available. Dry whey futures were weaker overnight in anticipation of a further price decline.

BUTTER:

Buyers have sufficient supply of butter on hand for current demand as well as buyers being comfortable with purchases already made for later this year. Slight slowing in retail sales is trickling through the market. Further price weakness is expected.




Tuesday, April 26, 2022

Tuesday Closing Dairy Market Update - South Trade Prices Released

MILK

Pressure on milk futures stemmed from the weakness of most of the categories of spot trading. The only gain was in the barrel price, which was unable to hold the initial gain during the trading period. Greater pressure was put on Class IV futures, resulting in May through August Class IV futures falling below Class III futures where they have not been for quite some time. The South Dairy Trade report was released Tuesday. This report records dairy product movement to the export market through ports in Argentina and Uruguay. The average price per ton of dairy products moved through ports in Argentina for the first half of March totaled 18,298.04 tons to 16 destinations at an average price of 4,053.39 per ton. Whole milk powder increased 1.2% from the previous report to 4,078.31 per ton or $1.85 per pound. Skim milk powder gained 2.0% to $3,471.73 per ton or $1.58 per pound. Semi-hard cheese declined 1.9% to $4,010.47 per ton or $1.82 per pound. Hard cheese increased 5.3% to $6,345.63 per ton or $2.88 per pound. Exports through Uruguay for the first half of April totaled 5,773.24 tons at an average price of $4,083.31 per ton to 21 destinations. Whole milk powder increased 1.8% to $3,941 per ton or $1.79. Skim milk powder increased 3.2% to $3,729.39 or $1.63 per pound. Semi-hard cheese declined 1.7% to $4,029.47 per ton or $1.83 per pound. Hard cheese jumped 12.1% to $5,874.59 per ton or $2.67 per pound. Butter increased 1.0% to $5,484.34 per ton or $2.49 per pound. Buttermilk fell 29.0% to $2,941.33 per ton or $1.34 per pound.

AVERAGE CLASS III PRICES

3 Month: $24.55
6 Month: $24.31
9 Month: $23.90
12 Month: $23.35

CHEESE

The inability of barrels to hold the gain Tuesday during spot trading and the weakness of blocks does not bode well in the near term. The market is not overwhelmed with milk or products. It is trying to balance supply with demand. The market does not want to price cheese above what consumers are willing to pay, which would result in slowing demand. Dry whey is struggling, as that is likely what has happened in that market. Price moved to a record high, which slowed demand that lower prices have not yet been able to win back for the time being.

BUTTER

The slow grind lower for butter and the decline of nonfat dry milk has affected Class IV futures significantly. Retail demand for butter has slowed in some areas but remains good overall. Churning is active and butter stocks have increased. This reduces some of the concern of buyers have over supply.

OUTSIDE MARKETS SUMMARY

May corn increased 3 cents, closing at $8.0325. May soybeans increased 1.75 cents, closing at $17.0525, with May soybean meal down $7.60 per ton, closing at $448.80. May wheat jumped 21.25 cents, ending at $10.8325. April live cattle gained $0.90, ending at $140. June crude oil jumped $3.16, closing at $101.70 per barrel. The Dow fell 809 points, closing at 33,240, while the NASDAQ fell 514 points, closing at 12,491.




Tuesday Midday Dairy Market Summary - Futures Under Pressure

OUTSIDE MARKETS SUMMARY:

CORN: 2 Higher
SOYBEANS: 6 Higher
SOYBEAN MEAL: $4.40 Lower
LIVE CATTLE: $0.90 Higher
DOW JONES: 625 Points Lower
NASDAQ: 419 Points Lower
CRUDE OIL: $4.06 Higher

MIDDAY MARKET UPDATE:

Block cheese price declined 2.75 cents, closing at $2.3650 with two loads traded. Barrel cheese price gained a penny, closing at $2.38 with seven loads traded. Price initially increased 2 cents before slipped back to the closing price. Dry whey declined 4 cents, closing at 57.50 with five loads traded. This moves the dry whey price top the lowest level it has been since Sept. 24, 2021. Price reaching over 80 cents earlier this year resulted in some demand destruction. Butter price slipped 0.75 cent, closing at $2.65 with no loads traded. Grade A nonfat dry milk declined 4.75 cents, ending at $1.7075 with no loads traded. Nonfat price is the lowest it has been since Jan. 6. Class III futures are unchanged to 19 cents lower. Class IV futures are 24 to 49 cents lower. Butter futures are unchanged to 1.12 cents lower. Dry whey futures are 3.00 to 3.85 cents lower.




U.S. dairy industry calls for action on supply chain relief

The U.S. Dairy Export Council (USDEC) and the National Milk Producers Federation (NMPF) recently sent a letter to the Biden administration recommending specific steps to provide relief and support to dairy farmers and exporters facing supply chain constraints.

The letter to Agriculture Secretary Tom Vilsack and Transportation Secretary Pete Buttigieg called for interagency collaboration to enhance capacity at ports, incentivize carriers to load export cargo, and improve transparency throughout the supply chain. The lead recommendation called for USDA’s Agriculture Marketing Service (AMS) to restart its Ocean Shipping Container Availability Report (OSCAR).

“Supply chain challenges have cost U.S. dairy exporters over $1.5 billion last year alone. We thank Secretaries Vilsack and Buttigieg for their advocacy for America’s agriculture exporters in the face of significant supply chain constraints. We are incredibly grateful for the administration’s ongoing efforts and creative solutions, particularly for the development of ‘pop-up’ sites for agricultural exporters to source empty containers,” said Krysta Harden, president and chief executive officer of USDEC.

The additional recommendations submitted would provide agricultural exporters much needed insight into container availability and provide avenues to incentivize carriers to load outbound shipments to key dairy markets around the world, she added.

Jim Mulhern, president and CEO of NMPF, noted that shipping containers for U.S. dairy exports continue to be in short supply at coastal ports, and even more scarce at inland locations. “These essential links in the global supply chain must be available to American dairy exporters throughout the country in order to ship their products to overseas buyers. We thank USDA and DOT for their strong focus on this issue.”

As congestion continues, so too must the spectrum of tools deployed to address these challenges, he stated, adding that the letter highlights the additional steps necessary to take to ensure American dairy farmers are not losing long-term international market share due to these persistent supply chain challenges.

The specified programmatic elements to provide supply chain relief include:

  • Restarting USDA AMS’ OSCAR, which would detail the availability of ocean shipping containers at locations throughout the United States.
  • Establishing inland pop-up terminal yards, similar to those in Oakland and Seattle, in Minneapolis, Chicago, Detroit, Salt Lake City and Kansas City. This would enable greater access inland to containers and improve the ability to secure vessel accommodations with short earliest-return-date windows at those locations.
  • Developing the “fast lane” concept to incentivize the flow of agriculture exports into and from ports. This would include trucking lanes at port terminals that are dedicated to the expeditious delivery of perishable agriculture goods to ports.
  • Incentivizing ocean carriers to load more export containers, instead of empty containers, through preferred or prioritized berthing access.
  • Including real-time tracking of containers as part of the Administration’s Freight Logistics Optimization Works initiative.
  • Piloting projects with carriers for ‘dual turns’ of containers, wherein containers delivering imports to an in-land location may be provided directly to an export-focused shipper, rather than being sent back empty to the port. This could be supported through the USDA’s Commodity Credit Corporation resources.


Tuesday Morning Dairy Market Update - Continued Price Uncertainty

OPENING CALLS:

Class III Milk Futures: Steady to 10 Higher
Class IV Milk Futures: 4 to 8 Lower
Butter Futures: Steady to 1 Lower

OUTSIDE MARKET OPENING CALLS:

Corn Futures: 5 to 7 Higher
Soybean Futures: 12 to 18 Higher
Soybean Meal Futures: $3 to $5 Higher
Wheat Futures: 20 to 25 Higher

MILK:

Class III milk futures settled back into the close Monday after being very strong early in the day. Steady cheese prices have not been viewed as bearish but current fundamentals suggest prices may remain in a range for the time being. Cow numbers are increasing along with production per cow, yet cheese inventory is decreasing at the time of year when it is generally increasing. Settling Class IV futures with double-digit losses in numerous contracts Monday despite there being no trading activity is somewhat of a rarity. Milk production continues to increase seasonally. Trading activity may be light prior to spot trading as traders wait for cash to provide direction.

CHEESE:

Steady cheese prices Monday with no buyers and sellers showing up to do any business leaves traders guessing as to price direction. There is little anticipation of any long-term weakness of cheese prices. Demand is strong with some plants having difficulty producing enough supply to fill orders. Some of this has to do with the lack of employees hindering full production schedules. Price dips are viewed as a buying opportunity to increase the ownership of product.

BUTTER:

The continued weakness of butter is a reflection of the slowing of retail sales. Food service demand is steady. Buyers have been purchasing ahead of time to hedge against the potential for higher prices later in the year. Price weakness has allowed buyers to continue to increase ownership without having to chase the market higher. Price is expected to be steady to weaker.




Monday, April 25, 2022

Monday Closing Dairy Market Update - Milk Futures Settle Back

MILK

It was a challenging day for getting any trading business accomplished in milk futures. May through July Class III futures had closer bids and offers with more volume. However, anything after that showed wide bids and offers with limited activity. Class IV futures were worse, as there were no trades all day with bids and offers wider apart than Class III. In fact, Class IV futures for June through November were settled with double-digit losses even though there was no trading activity. Futures were "marked to market" at significant losses anyway. Both Class III and Class IV futures are close together after a period of Class IV holding a substantial premium to Class III. Traders seem uncertain over the continued strength of underlying spot prices with the market may be moving into a sideways pattern for a period as the impact of other markets and demand is assessed. Class III futures were significantly higher early in reaction to lower cheese inventory on the March Cold Storage report. However, cheese buyers did not follow through on that optimism, which took away some of the steam in the market. Corn is 7% planted compared to 16% last year and a five-year average of 15%. Soybean progress shows 3% planted compared to 7% last year and a five-year average of 5%.

AVERAGE CLASS III PRICES

3 Month: $24.61
6 Month: $24.37
9 Month: $24.01
12 Month: $23.46

CHEESE

Steady cheese prices did not provide any direction for traders Monday. Overall cheese demand is strong with some plants having difficulty satisfying the orders that are coming in. Milk remains available for processing with the spot milk that is available holding a slight discount to cash. Buyers remain active on price dips with little concern that prices will trend lower anytime soon. There is a greater concern over the potential for higher prices as the year progresses.

BUTTER

Churning is active with cream remaining available. Increasing ice cream production is utilizing more cream, which is tightening supply to some extent and increasing prices. Retail sales are reported to be steady to slightly lower. Time of year and higher price is having an impact demand.

OUTSIDE MARKETS SUMMARY

May corn gained 7.25 cents, closing at $8.0025. May soybeans declined 12.50 cents, ending at $17.0350, with May soybean meal down $6.40 per ton, closing at $452.40. May wheat slipped 3.50 cents, closing at $10.62. April live cattle fell $3.35, closing at $139.10. June crude oil fell $3.53, ending at $98.54 per barrel. The Dow gained 238 points, ending at 34,049, while the NASDAQ gained 166 points, closing at 13,005.




Monday Midday Dairy Market Summary - Butter Prices Show Further Weakness

OUTSIDE MARKETS SUMMARY:

CORN: 4 Higher
SOYBEANS: 17 Lower
SOYBEAN MEAL: $6.10 Lower
LIVE CATTLE: $3.62 Lower
DOW JONES: 181 Points Lower
NASDAQ: 14 Points Higher
CRUDE OIL: $4.88 Lower

MIDDAY MARKET UPDATE:

Both block and barrel cheese prices remained unchanged at $2.3925 and $2.37, respectively, Monday with no loads traded in either category. No buyers or sellers showed up to do any business. Dry whey price declined 2 cents, closing at 61.50 with four loads traded. Butter price declined a penny, closing at $2.6575 with no loads traded an only an offer for one load setting the lower price. Grade A nonfat dry milk price remained unchanged at $1.7550 with one load traded. Class III futures are 18 cents lower to 13 cents higher. Class IV futures have not yet traded with wide bid and offers posted in the market. Butter futures are 0.50 cent lower to 2.57 cents higher. Dry whey futures are unchanged.




Cheese, butter prices raised due to firm demand

   As reported last week, the Agriculture Department raised its milk production estimate for the first time in a while in its latest World Agricultural Supply and Demand Estimates report (WASDE), citing expected higher dairy cow numbers.


    Price forecasts for cheese and butter were raised due to tighter stocks and firm demand. Non-fat dry milk prices were raised fractionally while whey prices were lowered. Class milk price projections were also raised.


    2022 production and marketings were estimated at 226.3 and 225.3 billion pounds respectively, up 300 million pounds on both. If realized, 2022 production would mirror output in 2021.


    Cheese is now projected to average $2.15 per pound in 2022, up 12 cents from last month’s estimate, and 47.5 cents above the 2021 average.


    Butter was projected at $2.64 per pound, up 6.5 cents from a month ago and 90.75 cents above 2021.


    Nonfat dry milk was projected at $1.7450 per pound, up a half-cent from last month’s estimate and 47.6 cents above the 2021 average.


    Whey is projected to average 69 cents per pound, down 2 cents from last month’s estimate but 11.6 cents above the 2021 average.


    The 2022 Class III milk price was projected to average $22.75 per hundredweight, up $1.10 from what was expected a month ago, and $5.67 above the 2021 average of $17.08.


    The Class IV average was projected at $24.05, up 35 cents from a month ago, and $7.96 above the 2021 average of $16.09.


    The WASDE stated that Russia’s recent military action in Ukraine significantly increased the uncertainty of agricultural supply and demand conditions in the region and globally.


    This month’s corn outlook is for offsetting changes to feed and residual use and corn used for ethanol production, with unchanged ending stocks. Feed and residual use was lowered 25 million bushels to 5.625 billion. Corn used to produce ethanol was raised 25 million bushels.


    Ending stocks were unchanged at 1.44 billion bushels. The season-average farm price was raised 15 cents to $5.80 per bushel based on observed prices to date.


    Global coarse grain production was forecast 2.7 million tons higher to 1.5 billion. This month’s foreign coarse grain outlook is for higher production, reduced trade, and larger ending stocks relative to last month. Foreign corn production was forecast higher with increases for Brazil, Indonesia, Pakistan, and the EU.


    Soybean supply and use changes included increased exports and seed use, and lower ending stocks. Soybean exports were raised 25 million bushels to 2.12 billion, partly offsetting lower exports from Brazil, Ukraine, and Russia. Seed use was raised in line with record soybean plantings indicated in the March 31 Prospective Plantings report.


    Soybean ending stocks were projected at 260 million bushels, down 25 million from last month. Soybean oil changes include increased exports and lower ending stocks. Despite relatively high soybean oil prices, export sales have been stronger than expected through March. A lower soybean meal export forecast is offset by slightly higher domestic disappearance. The season-average soybean price forecast was unchanged this month at $13.25 per bushel. Soybean meal prices were also unchanged at $420 per short ton.


    The global supply and demand forecasts include lower production, crush, trade, and ending stocks. Global soybean production was reduced 3.1 million tons to 350.7 million on lower crops for Brazil and Paraguay.


    Estimates for Ukraine’s corn and wheat exports were reduced, citing the shutdown of Black Sea ports. The USDA says Ukraine’s corn exports will drop to 23 million tons, down 4.5 million from last month’s estimate, while wheat exports were lowered to 19 million tons, down 1 million tons from the previous estimate.


    The Agriculture Department’s second Crop Progress report of the year shows 2% of the U.S. corn crop has been planted, as of the week ending April 10. That’s unchanged from the previous week but 2% behind a year ago and 1% behind the most recent five year average.


    Texas had the biggest planted percentage at 63%, up from 54% the previous week, and 6% ahead of a year ago, followed by North Carolina at 3%, up 14% from the previous week, and 3% ahead of a year ago.


    In the week ending April 2, 61,000 dairy cows were sent to slaughter, down 3,200 from the previous week, but 1,000 head or 1.7% above a year ago.


    The Good Friday Week gave us some startling news from the Bureau of Labor Statistics, which reported that inflation hit a 40-year high of 8.5%, as fuel and food prices skyrocket.
The U.N. Food and Agriculture Organization’s food price index hit record levels for three months in a row, according to Chicago-based StoneX Dairy Group, up 34% from a year ago. The February jump alone was up by 12.6%, largest single month rise ever, says StoneX.


    “These are prices as high as seen since the last major food crisis in 2008 and 2011,” and while “This is not exactly fresh news it is an unfolding story. Food price in?ation on this scale can lead to famine for less developed countries, political instability, mass migrations and ultimately commodity market volatility.”

    Speaking in the April 18 Dairy Radio Now program, broker Dave Kurzawski said food and fuel is the big difference between today and 1981. Core inflation, which is everything but food and fuel, was only up three tenths of one percent, he said, which is the slowest increase since last September.


    Kurzawski said overall core inflation, on an annualized basis, is up about 6.5%, which is well above the Fed’s desire of 2.5%, “So we’re missing the mark. It seems reasonable to see government cut spending, they should have done that a while ago, and it has to raise interest rates and do it with vigor.”


    He believes we will see demand issues but offered some hope, stating that the crude oil price has pretty much surrendered most, if not all, of its gains since the start of the Russian Ukraine war and there are other markets doing something similar. He admits inflation is not going away overnight but says “It’s interesting to note that while there was a burst of price increases across many of these markets, courtesy Russia-Ukraine, those markets are starting to calm down on those fears.”


    StoneX adds that “Developed nations may not face the brunt of the food insecurity that potentially lay ahead, but higher food prices are on the way. What we don’t know is the myriad of implications this will have on dairy demand. While some products, retail processed cheese, for example, might fare better than others, we believe more and more that the seemingly one-sided supply side story for the past six months will have stiff competition from growing demand side implications going forward.”


    On a brighter note; the April 8 Dairy and Food Market Analyst reports “Foodservice sales are hovering near pre-pandemic levels. The latest data from OpenTable shows seated diners down just 0.8% from 2019. This is a significant improvement from the more-than-20% declines in Feb. Air travel also remains on an upward trend. The latest data from the Transportation Security Administration shows air travel was down just 9.5% from pre-pandemic levels, which was the best performance so far in 2022,” the DFMA reported.


    One other bit of good news the DFMA offered concerned ports. The Marine Exchange of Southern California reports there were only 27 container ships waiting to berth in Los Angeles and Long Beach on April 8, which was down sharply from the all-time high of 109 on January 9th and comparable to prior-year levels.


    Most cash dairy prices strengthened in the Good Friday holiday shortened week. Block Cheddar closed Thursday at $2.3735 per pound, up 5.25 cents on the week and 59.25 cents above a year ago.


    The barrels finished at $2.44, 7.25 cents higher, 75 cents above a year ago, and an inverted 6.75 cents above the blocks. There were 8 sales of block on the week at the CME and 12 of barrel.


    “Cheese market tones remain in a bullish stronghold,” says Dairy Market News. Midwest sales remain very strong from a myriad of cheese producers. Over 4,000 cheese industry leaders, suppliers, and marketers gathered this week in Milwaukee, Wisconsin for the annual Cheese Expo.


    Hosted by the Wisconsin Cheese Makers Association and the Center for Dairy Research, attendees learned the latest in technology, new products, whey opportunities, product safety, marketing, and annual awards were presented.


    StoneX learnings at the event included that “Transport is still far and away one of the biggest issues the dairy industry faces. Export demand is really good, or at least it could be really good if transport was better. While Cheese inventories are impressive, there may not be as much overhang in the fresh market as thought, and there is a widespread belief that impressive in?ation is here to stay.”


    DMN reports that difficulties remain among staffing and, more particularly, hauling sectors. Stunted production rates at some plants has made milk accessible, but “It’s a mixed bag according to cheese plant managers. Milk is more balanced, and some handlers are asking them to release contracted milk loads in order to fulfill other cheese and bottling plants’ needs. Still, more discounts are being reported than Class prices.”


     Demand for cheese is steady in the West across retail and food service markets and international demand remains strong. CME prices have strengthened however cheese is still competitive to international prices. Same old story on port congestion and the shortage of truck drivers causing delays to both export and domestic loads. Milk production is steady to higher throughout the region, leaving supplies available for cheesemakers to run busy schedules and they are, with the exception of those still dealing with labor shortages, according to DMN.


    Cash butter slipped to $2.7750 per pound Tuesday and closed Thursday at $2.7550, down 2.75 cents on the week, but 90.50 cents above a year ago, with 5 sales posted for the week.
    Central butter producers report sales were boosted the previous week and into the weekend for last-minute orders ahead of the spring holidays. The emphasis now is on fall demand and export interests. As cream remains available, churning remains active despite continued staffing shortages. Bulk butter is tight, says DMN, and remains at a premium. Butter market tones are firm, with CME prices in a newfound range in the mid to high $2.70s.
    Cream demand is strengthening in the West as cream cheese and ice cream producers increase production in preparation for warmer weather. Cream is available. Demand for butter is steady in food service markets, while retail demand has declined. Strong export demand is present, as U.S. produced butter is being sold at a discount compared to international product. International demand is strong but port congestion is preventing greater volume. Bulk butter inventories are available, though unsalted inventories remain tighter than salted. Contacts report that some purchasers in other regions are purchasing butter from the West to meet current demand. Butter output is steady to higher as butter makers are running busy schedules to work through available supplies of cream.


    Grade A nonfat dry milk closed Friday at $1.8225 per pound, unchanged on the week but 60.75 cents above a year ago. 5 sales were reported on the week.


    Dry whey held all week at 63.50 cents per pound, 13 cents below a year ago, with 2 sales reported on the week at the CME.


    Fluid milk sales continue to take a beating. USDA’s latest data shows Feb. sales of packaged fluid products at 3.5 billion pounds, down 3.0% from Feb. 2021.


    Conventional product sales totaled 3.3 billion pounds, down 3.0% from a year ago. Organic products, at 225 million pounds, were down 3.9%, and represented 6.5% of total sales for the month.


    Whole milk sales totaled 1.2 billion pounds, off 0.9% from a year ago, down 0.7% year to date, and represented 33.4% of total milk sales in the two months.


    Skim milk sales, at 188 million pounds, were down 6.9% from a year ago and down 7.7% YTD.


    Total packaged fluid sales for the first two months of 2022 amounted to 7.3 billion pounds, down 2.3% from 2021. Conventional product sales totaled 6.8 billion pounds, down 2.1%. Organic products, at 471 million, were down 4.7%, and represented 6.5% of total milk sales for the period.


    The figures represent consumption in Federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S.




Dairy Industry Seeking Additional Export Supply Chain Help

The U.S. Dairy Export Council and the National Milk Producers Federation sent a letter to the White House regarding specific recommendations to help solve supply chain issues. The top recommendation calls for USDA’s Agriculture Marketing Service to restart its Ocean Shipping Container Availability Report. “Shipping containers for U.S. dairy exports continue to be in short supply at coastal ports and even more so at inland locations,” says Jim Mulhern, President and CEO of NMPF. “These essential links in the global supply chain must be available to exporters.” Other recommendations include setting up pop-up terminal yards in inland locations like Minneapolis and Chicago. That would make it easier to secure shipping containers. They also want to see trucking “fast lanes” dedicated to delivering perishable agricultural goods as quickly as possible at port terminals. Krysta Harden, president and CEO of USDEC, says supply chain issues have cost dairy exporters over $1.5 billion last year alone.




Monday Morning Dairy Market Update - Overnight Futures Point Higher

OPENING CALLS:

Class III Milk Futures: 20 to 30 Higher
Class IV Milk Futures: Mixed
Butter Futures: 1 to 2 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures: Mixed
Soybean Futures: 14 to 18 Lower
Soybean Meal Futures: $4 to $5 Lower
Wheat Futures: 8 to 12 Higher

MILK:

The slight weakness of Class III milk futures Friday was negated overnight and then some as futures traded significantly higher. Higher trade is the reaction to the bullish cold storage report for cheese. A decline of inventory in American cheese and total cheese is not typical during this time of year. Lower milk production than a year ago is having some impact on the output of cheese. Continued strong demand is also having an impact on supply. The milk production report showed cow numbers might be trending higher, but production remains below a year ago. If demand continues to remain strong, it may be difficult for inventory of cheese to increase for a time. Class IV futures may struggle a little as butter inventory increased. However, butter stocks remain 20% below a year ago, which should provide support.

CHEESE:

This is the third consecutive month that American cheese inventory declined. Generally, inventory increases this time of year and then decreases the second half of the year. Lower milk production and good fluid demand leaves milk available for cheese production, but not as much as is needed to meet demand and build inventory.

BUTTER:

Price continues to exhibit weakness as demand is being satisfied and inventory is growing. However, it is not gaining on the level of last year with March inventory 20% below a year ago. Further weakness is expected.




Friday, April 22, 2022

Friday Closing Dairy Market Update - March Cold Storage Report

MILK

Class III milk futures increased 1 cent to settle at $24.32 for April. May futures slipped 2 cents to $24.55. June slipped 4 cents, settling at $24.78. Class IV milk futures for April were unchanged at $25.20. May futures were down 4 cents to $24.62. June declined 21 cents, settling at $24.24. February fluid product sales totaled 3.5 billion pounds, 3% lower than a year earlier. Conventional fluid milk declined by 3%, and organic fluid milk fell by 3.9%.

AVERAGE CLASS III PRICES

3 Month: $24.55
6 Month: $24.52
9 Month: $24.14
12 Month: $23.54

CHEESE

Cold storage American cheese totaled 822.2 million pounds, slipping 1% from a year ago and from the previous month. Swiss cheese was at 23 million pounds, up 2% from a year ago, but down 8% from a month ago. Other cheese totaled 612.8 million pounds, staying level from a year ago and from the previous month. Total natural cheese slipped 1% from a year ago, totaling over 1.5 billion pounds. This was also 1% lower from a month ago.

BUTTER

Cold storage butter held 283.1 million pounds, declining 20% from a year ago and increasing 8% from February. Butter prices rising in grocery stores are contributing to the decline in consumer demand. Bulk butter ranges from 5 to 15 cents above market.

OUTSIDE MARKETS SUMMARY

May corn declined 6.25 cents, settling at $7.9550 per bushel. May soybeans fell 32.25 cents to $17.16 per bushel. Soybean meal futures were down $10.10 to $458.80. May wheat declined 2.50 cents to $10.6450. Live cattle were down $1.65 to $142.45. June crude oil slipped $1.72, settling at $102.07. The Dow dropped 981 points to 33,811, and the NASDAQ fell 335 to 12,839.




Monday Closing Dairy Market Update - Butter Inventory Declines Substantially

MILK: Trading volume in milk futures was light with only the January and February contracts showing a few hundred contracts trading ...