Cheese Demand Hits Full Stride
Published: Friday, July 24, 2020
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Midwestern cheese producers continue to report strong demand, according to Dairy Market News, but the rising prices has many buyers only taking "necessary loads." Cheese output is strong as milk is available however high temperatures in the region have some expecting lower milk supplies for Class III production. Mid-week spot milk prices were still under class but not as much as previous weeks.
Spurred on by government purchases and the ongoing refill of food service pipelines, Western cheese output is active, says DMN, with some manufacturers still running above design capacity. Processors seem eager to fill demand, especially at record high prices for block cheese however, higher prices may be cooling retail sales. DMN also warned that renewed social distancing requirements in parts of the West may dampen food service demand.
Some buyers even reported getting offers from international cheese sellers, looking to bring cheese to US markets. But without major discounting, the buyers are hesitant to take on the risk, says DMN. "There is too much uncertainty within the market to make a purchase that may take 30 to 60 days to complete."
Cash butter appeared to be caught in the upward pull of the cheese market Monday and last Tuesday and advanced 5.5 cents but it was short-lived, reversing gears last Wednesday, and closed last Friday at $1.69 per pound, unchanged on the week, pausing five consecutive weeks of decline, and 70.75 cents below a year ago. Twenty cars traded hands on the week.
Butter fundamentals are weakening fast, according to the DFMA. "Retail sales growth is plummeting at that same time that sales at full-service restaurants are contracting, again. Butter prices are likely to continue declining," the DFMA warned. It added that "Retail sales of butter posted the lowest growth rate in several months, up just 17 percent during the week-ending June 28. This is below the 24 percent growth rate for all of June and much smaller than the average growth rate of 50 percent in May."
It was primarily the drop in restaurant sales that plunged dairy product prices in April and restaurant reopening that helped bring them back up but the DFMA, citing data from Blackbox Intelligence which tracks sales at chain restaurants, showed that "Limited-service brands are experiencing sales growth. The fastest growing segments are chicken, pizza (cheese-friendly), and burgers (also cheese-friendly)," according to the DFMA. "Sales have been above prior-year levels for nine consecutive weeks," the DFMA says, just when block cheese rose from $1.2075 per pound to $2.6750."
But many full-service restaurants are not reopening and data from Open Table shows that through the end of June, 12 percent of all chain restaurants were still closed, the DFMA reported.
Midwest butter plant managers reported that spot loads of cream were more available this week, according to DMN. Market analysts say butter prices are still somewhat range bound but expect $1.90 to $1.95 to be the high end of said range moving into fourth quarter.
Western butter production is active despite many loads of cream going to ice cream production. In some parts of the West, cream sellers are offering a bit more loads in the spot market at affordable prices, which some butter makers are taking. Butter inventories are plentiful and retail sales are unchanged. While the rises in coronavirus cases is impacting restaurants, take-out orders are still high.
Grade A nonfat dry milk close last Friday at $1 per pound, down 1.5 cents on the week and 0.75 cents below a year ago, with 19 cars finding new homes.
Dry whey shot up 3 cents last Monday and closed last Friday at 33.50 cents per pound, 4.75 cents higher on the week but a half-cent below a year ago, on two sales.
The recent dip in whey prices was a result of plenty of product. The July 10 Daily Dairy Report points out "High Class III prices continue to encourage cheese production, and the resulting whey stream will be directed to production of dry whey versus higher-value products." It adds that "When gyms were closed and supplement stores were shuttered during COVID-19 lockdowns, sales of high-protein whey products, popular with the fitness industry, declined precipitously."
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