Cheese, Nonfat Dry Milk Popular with Foreign Buyers in November
Published: Friday, January 17, 2020
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
November U.S. dairy exports saw strong performance across most commodities, especially cheese and nonfat dry milk, according to HighGround Dairy's (HGD) Lucas Fuess in the Jan. 6 Dairy Radio Now broadcast.
Nonfat dry milk and skim milk powder shipments were up 41 percent from November 2018 and reached an all-time high for the month. Volumes to Mexico fell. Demand from Southeast Asia, Colombia and China drove demand to these levels, according to HGD, with the biggest jump by volume to the Philippines, highest since August 2018. U.S. exports to South America reached an all-time high in November, due to Colombia's demand for nonfat dry milk, and exports to China were the strongest since June 2018, says HGD.
"Butter fundamentals remain bearish as higher productivity continues to be paired with slow exports and higher overall fat imports in 2019," said HGD. Exports were down 18.6 percent from October and 11.3 percent below a year ago. September to November butter exports were each the lowest for their month since 2015 as fat to the Middle East, North Africa, Afghanistan and Pakistan as well as to our North American trade partners has weakened in recent months. U.S. butter output has exceeded prior year levels for six consecutive months, says HGD, and 2019 is on track to be the strongest butter production year since 1941.
Butter imports, at 5.2 million pounds, were down 30.7 percent from a year ago, but anhydrous milkfat imports were up 69.7 percent.
Cheese shipments moved higher seasonally, up 3.4 percent from October and 7.3 percent above a year ago, with gains to the top three destinations, Mexico, South Korea and Japan. Cheese exported to Canada reached a two-year high, while cheese imports, at 33.1 million pounds, were down 11.1 percent from a year ago.
Dry whey exports totaled 27.2 million pounds, up 29.8 percent from October but down 24.7 percent from a year ago.
The Daily Dairy Report points out that November U.S. dairy exports totaled $530 million, up 22.1 percent from a year ago. "On a daily average basis, November was the strongest month for U.S. dairy product exports since April 2015."
Back on the home front, most cash dairy prices fell in the first full week of trading in two weeks. Cheddar block cheese dropped to $1.8250 per pound last Thursday, lowest since Dec. 26, but closed last Friday at $1.87, 2 cents lower on the week but 46 cents above a year ago. The barrels fell to $1.5175 last Thursday, lowest since June 5, 2019, but inched back to $1.5225 last Friday, down 12 cents on the week but 27.75 cents above a year ago and a unsustainable 34.75 cents below the blocks. There were 24 cars of block traded on the week and 26 of barrel.
Midwest cheesemakers had positive reports on demand the week after New Year's, according to Dairy Market News. "Demand upticks are factored by somewhat lighter market prices when compared to late 2019 and football playoff season," said DMN. "Production is ongoing and picking up." Spot milk supplies were ample and solely at discounted rates. Cheese stocks are balanced and most loads are spoken for ahead of production. "The block barrel price gap is and has been hovering around 25 cents, which is not symbolic of what contacts believe to be stable markets," said DMN. "They prefer a price gap under a dime."
Cheese price volatility in the west is affecting buyer behavior, according to DMN, with some taking a break while monitoring market conditions, looking for the right time to buy. Several retailers are replenishing their stocks following the holidays and, with the football season just weeks away, the hope is that there will be a revival in cheese sales. Cheese output is ongoing, stirred by strong milk supplies in the region, but "there is also a good equilibrium between the quantity of cheese requested and stocks at hand," said DMN.
Butter fell to $1.87 per pound last Wednesday, lowest CME price in three years, but closed last Friday at $1.92, down 3 cents on the week and 33.75 cents below a year ago, as the heavier-than-expected November output weighed on the market. Twelve cars traded hands on the week.
Butter producers are churning ahead of the spring demand season, but some say they can't churn fast enough with the current availability of cream. "Analysts expect butter to hold in its range this year, but the goalposts have been adjusted from the $1.80s into the $2 area," said DMN.
"Heavy milk production, high components and the pullback of Class II dairy production following the holidays have yielded a surfeit of cream for Western churns," said DMN. Butter makers report active production. To no surprise, retail butter orders are slow except for the regular refill of store shelves.
Grade A nonfat dry milk finished last Friday at $1.2725 per pound, up 4 cents on the week, highest since Oct. 23, 2014, and 24.25 cents above a year ago, with 19 cars exchanging hands on the week.
CME dry whey saw a Friday finish at 34.75 cents per pound, up 3.25 cents on the week but 14.75 cents below a year ago, with 54 sales reported for the week.
FC Stone said, "No doubt there's been product available, but with budding bullishness in both the feed market as well as the powder market (courtesy of the GDT), buyers are lined up to own dry whey in the low-30s."
Another landmark dairy business, Borden, announced last week that it has filed for Chapter 11 Bankruptcy after more than 160 years in business.
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