Dairy Prices Slip in Global Auction
Published: Friday, April 30, 2021
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Looking globally, the April 20 Global Dairy Trade auction weighted average slipped .1 percent, following a .3 percent uptick on April 6. Lactose led the losses, down 3.4 percent after plunging 6.5 percent in the last event. Anhydrous milkfat was down 3.3 percent, after inching .8 percent higher. Butter was off .6 percent, following a 2 percent advance.
GDT Cheddar was up 1.2 percent, after posting a 2.2 percent gain last time, and whole milk powder inched .4 percent higher.
StoneX says the GDT 80 percent butterfat butter price equates to $2.5382 per pound U.S., down 1.8 cents, and compares to CME butter which closed last Friday at $1.77. GDT Cheddar, at $2.0120 per pound, compares to last Friday's CME block Cheddar at $1.7925. GDT skim milk powder averaged $1.5265 per pound, down from $1.5272, and whole milk powder averaged $1.8583 per pound, up from $1.8531. CME Grade A nonfat dry milk closed last Friday at $1.2525 per pound.
The proverbial elephant was in the dairy aisle in March. China's Customs Statistics show record highs for the month with notable gains from New Zealand, Germany, the U.S., Australia and Poland, according to HighGround Dairy.
Whole milk powder imports totaled 182.6 million pounds, up 76.6 percent from March 2020, almost 93 percent of them from New Zealand. Skim milk powder totaled 69.6 million pounds, up 27.2 percent.
Whey imports hit a record 267 million pounds, up 76.7 percent. Volumes from the U.S. were higher, but U.S. market share fell slightly from 2020. Countries seeing a rise in market share were Poland, Belarus and Turkey, according to HGD.
China imported 25.5 million pounds of butter, up 41.5 percent from a year ago, and cheese imports totaled 44.8 million pounds, up 74.1 percent.
Fluid milk and cream demand remained strong with imports from New Zealand expanding, as well as from the E.U. The largest supplier within the E.U. was Germany, followed by Poland and France, says HGD.
Back home, CME cash block Cheddar hit $1.80 per pound last Monday but finished last Friday at $1.7925, up 1.25 cents on the week and 72.25 cents above a year ago.
The barrels closed at $1.8050, up 11.50 cents, highest since Nov. 12, 2020, 75.50 cents above a year ago, and an inverted 1.25 cents above the blocks, first time since July 30, 2020. Twenty-two cars of block and 26 of barrel sold on the week.
Midwest cheese plant managers tell Dairy Market News that spot milk remains available, with prices at or around $5 under Class III. Some plants resell milk on some days while other days they are trying to stay ahead of the robust supply. Schedules are full and record-setting in some cases while others have only recently upped their output to fulfill demand. Cheese demand is mostly positive, but market tones are uncertain, says DMN, with barrel prices overtaking blocks, "which creates questions about near term trends."
Food service cheese demand has increased in the West as more areas loosen COVID restrictions. Some contacts report a shift in production focus from retail orders, which are and have remained steady, to growing restaurant/food service. Changes in government programs regarding the purchase of cheese and dairy products in general have caused some market instability. The block-barrel inversion also left contacts with uncertainty. Production schedules are full as there continues to be plenty of milk available, according to DMN.
Butter Is Back
Butter got back to $1.87 per pound last Monday, fell to $1.74 last Thursday, and closed last Friday at $1.77, 8 cents lower on the week but 62.50 cents above a year ago. Forty-four cars were sold, highest since December 2020. Outside of a few temporary blips, you'd have to go back to November 2019 to find butter consistently above $2 a pound.
DMN said, "Since roughly the ides of March, Central food service butter sales have incrementally shifted higher week after week," however contacts this week reported sales were somewhat subdued though churning was busy.
Western cream is abundant with "a few pockets of seemingly tightening output," says DMN, but even in these areas, cream supply is meeting demand. Limited tanker availability continues to stymie greater movement of cream within and out of the region. Butter makers are maintaining seasonally active schedules and inventories are stable. Food service demand is "booming;" some cafeterias, restaurants and other food service outlets are nearing pre-pandemic levels of operation and retail sales are steady. Some contacts report that export demand is beginning to decline as U.S. prices are becoming less competitive.
Grade A nonfat dry milk climbed to a Friday close at $1.2525 per pound, up 3.75 cents on the week, highest since Jan. 30, 2020, and 44.25 cents above a year ago. There were eight sales reported on the week.
CME dry whey set a new CME record at 70.25 cents per pound last Tuesday, but backed down to a Friday close of 62 cents, down 5.50 cents on the week and 23.50 cents above a year ago. There were four sales on the week at the CME.
The May federal order Class I base milk price was announced at $17.10 per hundredweight, up $1.59 from April, $4.15 above May 2020, and the highest Class I price since December 2020. It equates to $1.47 per gallon, up from $1.33 in April and compares to $1.11 per gallon a year ago. The five-month average is at $15.70, down from $16.72 a year ago and compares to $15.72 in 2019.
The latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC, say "Dairy margins were mixed over the first half of April, strengthening in nearby slots but weakening in deferred marketing periods further out on the curve." The MW blamed the announcement that the Biden administration will end the Food Box Program after extending it through the month of May.
"The USDA spent $3.8 billion last year as well as another $1.5 billion through the first four months of this year distributing a variety of fruit, meat and dairy products to needy Americans struggling with the pandemic," the MW stated. "While the program was lauded even by Democrats including Sen. Dick Durbin of Illinois, the high administrative costs and logistical challenges of the effort were cited as factors in the decision to shut it down and shift aid by expanding food stamp benefits and increasing purchases through other food distribution programs. Despite what will likely be reduced government buying going forward, dairy demand in general remains quite strong," the MW said.
"U.S. dairy products are competitively priced on the world market and moving at an accelerated pace despite numerous challenges in the global supply chain. Unfortunately, renewed concerns over forward feed costs with a cold snap in the Midwest possibly delaying germination this spring after a surprisingly bullish Planting Intentions report has tempered enthusiasm," the MW concludes.
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