Cheese Demand Keeping Up with Supply
Published: Friday, January 31, 2020
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Cash cheese prices strengthened in the shortened Martin Luther King Day holiday week. The blocks topped $2 per pound for the first time since early November but finished last Friday at $1.9950, up 3.25 cents on the week and 60.5 cents above a year ago, with 16 cars exchanging hands on the week. The barrels climbed to $1.63 but closed at $1.61, 4.75 cents higher on the week, 43 cents above a year ago, but 38.5 cents below the blocks. Twenty-three cars sold on the week.
Cheesemakers tell Dairy Market News that demand is meeting expectations so far in 2020. Barrel producers say they are not building inventories and are focusing on producing other varieties and clearing out holiday inventories of process cheese. Regionally, cheese inventories are in good balance. However, more cheese has been and is being produced, with milk at post-holiday availability levels. Milk prices have come up, but some cheesemakers reported flat Class III purchases. Discounts are still reported, but cheese market tones remain in a state of "unease" with the large block-over-barrel price spread.
Barrels are more available than blocks in the West, according to DMN, because some processors have changed their emphasis from blocks to barrels. Sales for both are active, however; some buyers are taking a breather hoping cheese prices decline. Inventories remain available to fulfill all orders. Cheese outputs are in line with seasonal norms, with many plants operating close to full.
Cash butter continued heading south, closing last Friday at $1.86 per pound, 2 cents lower on the week, lowest since November 2016 and 38.5 cents below a year ago. Only six cars traded hands on the week.
January has been much of the same, according to butter makers, on multiple fronts. There is plenty of cream and more than enough is coming from the Western-Mountain states but still at affordable prices. Churning rates are very active and directed for spring demand increases, as demand is expectantly seasonally quieter in current markets. Most contacts expect the range-bound status to remain this year but at the sub-$2 average that emerged in December.
Western butter makers say retailers are replenishing stocks following the winter holidays and preparing for the spring holidays. Bulk butter buyers, prompted by lower prices, are laying on coverage for near-term needs. But other end users are slow to go after butter offers, feeling content with their current holdings and noting the wide availability of cream. Manufacturers report cream multiples are low and DMN says, "The weekly average cash butter price on the CME is below the price of the previous four years at this time." Butter stocks are "comfortable."
Grade A nonfat dry milk closed at $1.2875 per pound, down a quarter-cent on the week and 27.5 cents above a year ago, with 20 carloads sold on the week.
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