Dairy Prices Decline Again on GDT
Published: Friday, August 13, 2021
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Last Tuesday's Global Dairy Trade saw its weighted average fall for the eighth consecutive session, down 1 percent, following a 2.9 percent drop July 20 and 3.6 percent on July 6. Traders brought 53.1 million pounds of product to market, up from 49.4 million. The average winning price was $3,784 U.S., down from $3,839.
Buttermilk powder was down 8 percent. Whole milk powder was down 3.8 percent, following a 3.8 percent decline, and lactose was down 3.1 percent, after an 8.9 percent drop.
Butter led the gains, up 3.8 percent, after it inched .8 percent lower last time. Anhydrous milkfat was up 1.3 percent, after it slipped .3 percent. Skim milk powder was up 1.5 percent, after dropping 5.2 percent, and Cheddar inched .7 percent higher after it gained 1.3 percent last time.
StoneX says the GDT 80 percent butterfat butter price equates to $2.0308 per pound U.S., up 7.5 cents, and compares to CME butter which closed last Friday at $1.6475. GDT Cheddar, at $1.8437, was up 1.9 cents, and compares to last Friday's CME block Cheddar at $1.6350. GDT skim milk powder averaged $1.37 per pound, up from $1.3476. Whole milk powder averaged $1.6322 per pound, down from $1.6920. CME Grade A nonfat dry milk closed last Friday at $1.2550 per pound.
Meanwhile, June U.S. dairy exports remained strong. Nonfat dry milk was up 7.4 percent from June 2020, with most going to Mexico, according to HighGround Dairy, and to Indonesia. Shipments to China were the highest since August 2014.
HGD says the first half of 2021 translated into record exports to China, Egypt and South America, helping offset losses to Japan and Southeast Asia. China's demand has been particularly strong for whey and other proteins and powders.
Cheese exports were down 12.9 percent but HGD says the losses are skewed by the pandemic-driven volumes observed last year.
CME prices started August scattered. The Cheddar blocks parked at $1.6350 per pound on July 27 and stayed there for eight successive sessions. Traders apparently took this week off, with no activity. The blocks are priced 7 cents below a year ago when they plunged 54.75 cents, largest week to week block price fall ever.
The barrels fell to $1.3075 per pound last Wednesday, lowest since May 11, 2020, but closed last Friday at $1.31, down 8 cents on the week and 20.75 cents below a year ago when they plunged to $1.5175 per pound, a record 71.75 cent crash.
The spread expanded to 32.75 cents last Tuesday, huge but not close to the record $1.0125 difference on Sept. 21, 2020, when blocks were trading at $2.6475 and barrels at $1.6350. Only 19 cars of barrel were sold on the week.
Midwest cheesemakers tell Dairy Market News week-to-week sales remain strong as product moves quickly into food service and grocery channels. Milk remains available at discounts but not as low as previous week. Bottling demand increases are chipping away at fluid supplies as schools ramp up. Cheese output remains busy and Midwest inventories are not overly concerning, says DMN.
Western retail and food service cheese markets remain steady and international demand remains strong but port congestion continues to cause delays.
Spot butter shot up 5.75 cents last Monday, then plunged 8 cents Tuesday, and closed Friday at $1.6475 per pound, a half-cent higher on the week and 11.75 cents above a year ago. There were 19 sales reported for the week.
Butter plants report cream is still attainable with multiples remaining in the low 1.20s and readily available from Western states. Retail sales have picked up a bit following a mid-summer lull but butter market tones are anything but stable.
Western cream production is trailing off. More abundant cream supplies, particularly in the Southwest, are supporting busier butter output. Churns are less active in other areas where cream is short or cream cheese production is taking more of the supply. Retail sales are strengthening and food service is steady.
Grade A nonfat dry milk closed last Friday at $1.2550 per pound, down 1.25 cents on the week but 30 cents above a year ago, with 10 sales reported on the week.
Dry whey fell to 47.50 cents per pound last Thursday, lowest since Jan. 4, but rallied to a Friday close at 54 cents per pound, up 3.75 cents on the week, highest since July 2, and 22 cents above a year ago. Seven sales were reported for the week.
A lower all-milk price and higher corn price continued the slide in the U.S. milk feed ratio. The USDA's latest Ag Prices report showed the June ratio at 1.60, down from 1.69 in May, and compares to 2.38 in June 2020.
The U.S. all-milk price averaged $18.40 per hundredweight, down 80 cents from May but 20 cents above the June 2020 average.
The national average corn price climbed to $6 per bushel, up 9 cents from May, after jumping 60 cents from April, and $2.84 per bushel above May 2020.
Soybeans averaged $14.50 per bushel, down 30 cents from May and the first decrease since August 2020, after jumping 90 cents last month, but are still $6.16 per bushel above June 2020.
Alfalfa hay averaged $199 per ton, up $5 from May and $20 above a year ago.
Cow Prices Hold Steady
Looking at the cow side of the ledger, the June cull price for beef and dairy combined averaged $73.90 per hundredweight, up $3.10 from May, $2.90 above June 2020, and $2.30 above the 2011 base average of $71.60 per hundredweight.
Milk cow replacements averaged $1,310 per head in July, unchanged from April and unchanged from July 2020. Cows averaged $1,350 per head in California, down $50 from April and unchanged from a year ago. Wisconsin's average, at $1,480 per head, was down $10 from April but $130 per head above July 2020.
The Aug. 3 Daily Dairy Report points out that dairies are also dealing with rising transportation and labor costs. The DDR cited U.S. No. 2 retail diesel for the week of Aug. 2 at $3.37 per gallon, 94 cents higher than a year ago.
The June margin under the Dairy Margin Coverage program dropped 65 cents from May to $6.24 per hundredweight, which will generate a June payment of $3.26 for $9.50 per hundredweight coverage, according to National Milk. The feed cost calculation for June was lower by 16 cents per hundredweight of milk from May, mostly on lower soybean meal prices, while the all-milk price took a larger than expected drop.
NMPF says the futures-based price outlook indicates that the DMC margin will not rise much above $7 per hundredweight through the summer and remain below $9.50 through the end of 2021. USDA reported that estimated DMC payments for the 2021 program exceed $543 million as of July 26.
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