Dairy Exports Hitting Their Stride
Published: Friday, December 17, 2021
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
October U.S. dairy exports were "decently impressive," said HighGround Dairy's Lucas Fuess in the Dec. 13 Dairy Radio Now broadcast, topping year ago levels for the ninth consecutive month, up 2.1 percent, and helped clear domestic stocks.
Cheese totaled 78.5 million pounds, up a whopping 43.7 percent from October 2020. Cheese shipments were the strongest on record for the month with Mexico, accounting for 22 percent market share, according to HighGround Dairy, and up 61 percent from a year ago. Notable gains were also made to South Korea and Australia.
Butter exports totaled 9.8 million pounds, up 91.3 percent. Nonfat dry milk-skim milk powder fell to 147.4 million pounds, down 12.3 percent, though YTD exports are up 10.6 percent. Exports of dry whey totaled 41.7 million pounds, down 21.5 percent. Year-ago levels on both were high and tough to beat, according to Fuess.
China remained the second largest destination, according to HGD. However, exports were down 32 percent from 2020. Demand for whey declined, mostly to China, down 56 percent from last year. Nonfat dry milk exports to China were down 32 percent.
The global market holds good promise and the Dec. 3 Dairy and Food Market Analyst (DFMA) cites the lack of global milk supplies and the potential market share gains from American exporters. Shipping delays are also improving.
Unfortunately, domestic demand may slip, according to the DFMA. "Data from restaurant analytics firm Open Table shows a significant slowing in restaurant traffic around the globe. In the seven days before the omicron news restaurant traffic in the U.S. had been within 1 percent of pre-coronavirus levels, but has moved to be down 10 percent in the latest week. In other countries Open Table shows the same trend."
Cheddar block cheese started the week falling to $1.8425 per pound but closed last Friday at $1.8650, up .75 cents on the week, highest since Nov. 18, and 24.75 cents above a year ago.
The barrels climbed to $1.6925 last Wednesday, highest since Nov. 1, but finished at $1.68, 7.75 cents higher, 23.75 cents above a year ago, and 18.50 cents below the blocks. Six cars of block were sold and eight barrel.
Midwest cheesemakers tell Dairy Market News that spot milk offers were quiet this week, as milk prices shifted higher. Multiple plants were closed for maintenance while others were busy. Staffing shortages remain but have improved. Cheese demand is meeting seasonal expectations but some plants are not likely to catch up on orders until the onset of 2022. Market tones remain uncertain, but slowly gaining momentum as barrel prices edge closer to blocks.
Western retail cheese demand is steady, food service reportedly trending higher, and international demand remains strong. Port congestion and a shortage of truck drivers continues. Milk is available allowing busy cheese production.
Butter climbed to $2.06 per pound last Tuesday, then backtracked some, but jumped 7.50 cents last Friday to close at $2.1225, up 12 cents on the week, highest since Oct. 17, 2019, and 64.25 cents above a year ago. There were 31 sales reported.
Central butter makers report post-Thanksgiving cream availability remained somewhat hearty in the region and from the West. Freight options from Western sources are limited with few signs the situation will level out in the near future. Butter demand is seasonally strong, and now that cream has become more available, churning is more active, says DMN.
Western cream inventories are steady with enough available but demand is strong. Some purchasers in other regions are looking for cream in the West but loads are reportedly facing delays due to a shortage of truck drivers. Domestic butter demand is steady to higher in both retail and food service markets. Export demand remains strong. Butter producers are running below capacity due to delays to production supplies and a shortage of labor, according to DMN.
Grade A nonfat dry milk closed last Friday at $1.6250 per pound, 6.25 cents higher on the week, highest since Aug. 4, 2014, and 49.75 cents above a year ago, on 19 sales for the week.
Whey finished at 71.25 cents per pound, up 1.50 cents on the week on unfilled bids, highest price ever since it started trading at the CME on March 12, 2018, topping 70.25 cents a pound on April 20, 2021 and 24.50 cents above a year ago.
Back on the farm, dairy margins were steady to mixed the second half of November, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC, as "milk prices and projected feed costs largely traded sideways but held firm."
The MW stated, "USDA Cold Storage data provided some color around recent strength in Class IV milk prices relative to Class III," citing the latest butter and cheese data which I recently reported. It added that "Strong global demand and production declines in both New Zealand and the EU are helping support U.S. dairy product prices."
"Corn continues to hold firm with worries over soaring fertilizer prices and dry weather in South America providing support while attractive projected returns from crops such as spring wheat, oats and cotton will force new-crop corn to compete on price for acreage in the upcoming planting season," the MW concluded.
Signup opened for the Dairy Margin Coverage (DMC) program last week and the program was expanded to allow producers better protect their operations by enrolling supplemental production. Signup runs through Feb. 18.
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