A Good Week for Cheese Prices
Published: Friday, October 30, 2020
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The dairy markets had a feeding frenzy of information last week from the Global Dairy Trade auction plus the Milk Production, Cold Storage and Slaughter reports. The Cheddar blocks closed the fourth Friday of October at $2.7725 per pound, up 5.25 cents on the week and 64.50 cents above a year ago. Hard to believe they were in the $1 per pound range just a few months ago.
The barrels finished the week 25 cents higher, sixth week in a row of gain, hitting $2.4550, per pound, highest since July 21, and 20.50 cents above a year ago when they jumped 25 cents and were at an inverted 12.25 cents above the blocks. This year they were 31.75 cents below the blocks, but the gap is narrowing. There were three sales of block on the week at the CME and 11 of barrel.
Spot milk trading was fairly quiet last week, according to Dairy Market News, with prices remaining close to the previous week, hovering around class. Customers who let their pipelines run dry are returning to the buying fold, says DMN, and cheese production rates remain steady and closer to normal. Cheese producers are not trying to add inventory in case buying slows and or markets ebb. COVID-19 is affecting some production facilities, as employees are quarantining. Cheese market tones continue to show steadiness to slight bullishness, says DMN.
Western cheese manufacturers are working hard to keep up with orders. Retail demand is active as stores prepare to fill holiday needs and while some contacts believe food service orders are slowly recovering, restaurants continue to face challenges of space and operational restrictions. Large volumes of cheese are moving to pizza and government purchases, supporting the higher prices, but have hindered export sales. A few contacts suggest processors have even increased cheese imports to fill some processed cheese needs. Contacts are speculating what government purchases and subsequent cheese demand will look like as government buying winds down. Block inventories are tight, and to a lesser extent, so are barrel supplies, but contacts suggest stocks are increasing. Western buyers are also hesitant to take on cheese at current prices. Cheese output remains active as ample milk supplies are keeping the vats full.
Meanwhile, last Friday morning, the National Milk Producers Federation issued a press release applauding USDA for "deciding to fund an additional $500 million for combination food boxes to be delivered through the end of the year."
Cash butter didn't do so well, falling to $1.4350 per pound, 7.50 cents lower on the week and 62.5 cents below a year ago, with 13 sales reported.
Butter producers continue to churn steadily as cream remains available. Plant managers report that cream is available from local and Western sources and cream suppliers are negotiating ahead of time for the week of Thanksgiving. Butter demand remains positive from retail and food service demand continues to edge up weekly, but pale in comparison to recent years. Butter producers say some retail buyers' pipelines are nearly depleted. Butter markets continue with a softness, says DMN, "and contacts suggest near term expectations remain somewhat subdued regarding butter market tones."
Western butter output is variable. Projected orders are coming in at expected levels and being satisfied, using stored inventory and new butter production. Cream supply has not been a problem and availability is ticking higher, even as seasonal competition from Class II manufacturing takes form. Export orders continue to advance butter to offshore customers, says DMN.
Grade A nonfat dry milk also saw weakness in the market, closing last Friday at $1.0975 per pound, down 4.25 cents, ending 10 consecutive weeks of gain, and is 5.5 cents below a year ago. Twenty-three sales were reported for the week.
StoneX stated in last Friday's Early Morning Update, "U.S. nonfat dry milk is at an enormous discount to world skim milk powder prices. It is surprising to see this much weakness after only a slightly weaker GDT."
Dry whey finished at 38.50 cents per pound, down a quarter-cent on the week but 10.25 cents above a year ago, with only one sale reported on the week.
Butter and cheese nudged last week's Global Dairy Trade auction weighted average up .4 percent, following the 2.2 percent advance on Oct. 6, and 3.6 percent on Sept. 15. Sellers brought 76.4 million pounds of product to the market, down from 77.4 million on Oct. 6.
GDT butter was up 3.3 percent, following the 8.4 percent gain on Oct. 6. However, anhydrous milkfat was down .5 percent last Tuesday, after climbing 5.4 percent in the last event. Cheddar was up 3 percent, after inching .4 percent higher, and whole milk powder crept up .3 percent, after a 1.7 percent rise last time.
Lactose again led the losses, down 8 percent, after dropping 7.4 percent last time, and skim milk powder was off .2 percent, after slipping .9 percent lower last time.
StoneX equated the GDT 80 percent butterfat butter price to $1.6277 per pound U.S., up 5.2 cents from the last event. CME butter closed last Friday at $1.4350. Cheddar cheese equated to $1.7249 per pound, up 4.9 cents, and compares to last Friday's CME block Cheddar at $2.7725. GDT skim milk powder averaged $1.2933 per pound, down from $1.2996, and whole milk powder averaged $1.3776, down from $1.3796. CME Grade A nonfat dry milk closed last Friday at $1.0975 per pound.
One other global note, Farm Journal's Jim Dickrell reports that Canadian Prime Minister Justin Trudeau renewed his promise to compensate dairy farmers for losses they might incur due to the U.S.-Mexico-Canada Trade Agreement. He said, "Canada began compensating its dairy farmers $1.75 billion last year for trade losses due to recent agreements with Europe and Pacific Rim nations. Compensation for USMCA losses had been promised when the deal was being negotiated," according to Dickrell, but the level is currently being negotiated.
Return to Top of Page