Virtual Start Could Hurt Milk Sales
Published: Friday, September 4, 2020
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Exports have improved as U.S. prices converge with international prices. Contacts are eager to see how the next round of government purchases will develop, but it's not clear how much cheese school lunch programs may need with many schools starting virtually this fall. Milk supplies are ample and discounted milk is available with most western plants running at or near capacity.
Butter saw its Friday close at $1.4475, down 6.75 cents on the week, 16 cents below its Aug. 1 perch, and 74.25 cents below a year ago. Forty-three cars were sold.
Cold Storage data was the topic of the week for butter traders, according to DMN. Month-over-month gains were modest, but the yearly uptick was notable. Cream availability increased slightly last week and they expect availability to loosen ahead of Labor Day weekend. Food service demand remains in question.
The Western butter market is stable. Prices were unchanged from a week ago even though inventories picked up a bit. Not a lot of change happened on the demand side. Retail sales are still strong, but not as much as in the past month, and food service sales remain lower than usual for this time of the year. Unrest in Portland and Seattle have affected a few high-end restaurants and some were modifying opening schedules while others have closed temporarily. The fires in California are also affecting consumer eating habits and trips to restaurants.
Spot Grade A nonfat dry milk closed at $1.02 per pound, up 2.25 cents on the week but 2.75 cents below a year ago, with 18 sales reported on the week.
Cash dry whey saw its last Friday closing at 34 cents per pound, up a half-cent on the week but 5 cents below a year ago, with 13 sales reported for the week.
StoneX Group warned in its Aug. 24 "Early Morning Update:" "Without the sales that come from schools of all levels across the country, it is likely that we will see an even greater pullback in dairy prices in an attempt to encourage sales. Exports could potentially benefit from a lower price, but the likelihood that any increase in export volume offsets the loss in domestic sales is slim."
Dairy cow slaughter totaled 53,500 head the week ending Aug. 15, up 500 head from the previous week but 8,100, or 13.1 percent, below a year ago.
In politics, there were more calls on lawmakers to enforce the U.S.-Mexico-Canada Agreement. A bipartisan group of 25 senators sent a letter to the U.S. trade representative and the USDA, identifying challenges to implementing USMCA's dairy-related provisions.
"As negotiated, the USMCA will create new export opportunities for America's dairy industry and creates an equitable playing field for American dairy exports in Mexico and Canada," the letter stated. "Given the importance of these provisions to our dairy farmers and to American dairy exports, we ask that you use USMCA's enforcement measures to hold our trading partners accountable to their trade commitments. It is imperative that Canada and Mexico deliver upon their agreed upon commitments related to dairy products."
In other trade news, China's July imports of whole milk powder hit 81.8 million pounds, down 11.3 percent from July 2019 and the lowest July volume since 2016, according to HGD. It was the second consecutive month of lower WMP imports, but year to date imports remain negligibly higher versus prior year.
Whey imports hit 140.4 million pounds, up 63.6 percent, setting a new record high and was the sixth consecutive monthly year-over-year gain. HGD says China has ramped up whey imports to take advantage of lower prices and build stocks as its African swine fever crisis slowly wanes. Imports from the U.S. were up 45 percent, but market share declined from 38 percent to 34 percent as the EU captured more gains.
Butter imports, at 14.3 million, were up 82.6 percent and anhydrous milkfat was up 102.6 percent. Cheese imports totaled 35.5 million pounds, up 99.4 percent from a year ago.
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