WMP Leads Rally in Dairy Auction; Dairy Consumption at 62-Year High
Published: Friday, January 28, 2022
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
If there was any doubt about strength in the global dairy market, it was erased in the second Global Dairy Trade auction of 2022, its 300th trading event. The weighted average jumped 4.6 percent, biggest increase since March 2, 2021, and followed the .3 percent rise on Jan. 4 and the 1.5 percent fall on Dec. 21. Traders brought 67.6 million pounds of product to market, with the average price climbing to $4,463, highest since March 2014.
All products offered were in the black, led by whole milk powder, up 5.6 percent, after holding steady on Jan. 4. Skim milk powder was up 5 percent, following a 1 percent increase, and butter was up 5 percent, after inching .3 percent higher. Anhydrous milkfat was up .6 percent, after slipping .7 percent last time. Cheddar was up 1.1 percent following a 4.9 percent jump.
StoneX Dairy Group says the GDT 80 percent butterfat butter price equates to $2.7252 per pound, up 12.8 cents, and compares to CME butter which closed last Friday at $2.9350. GDT Cheddar, at $2.5157, was up 2.7 cents and compares to last Friday's CME block Cheddar at a real bargain $1.8075. GDT skim milk powder averaged $1.7977 per pound, up from $1.7114. Whole milk powder averaged $1.8517 per pound, up from $1.7536. CME Grade A nonfat dry milk closed last Friday at $1.8150 per pound.
StoneX's Dustin Winston says North Asia (which includes China) buyers continue to seem hesitant, market share was up just slightly from the last event, but remain well below last year's levels. The Middle East picked up a large share of whole milk powder, according to Winston.
Speaking of China, December dairy imports fell a combined 13.4 percent from December 2020, according to HighGround Dairy's analysis, but adds the caveat: "While there is a lot of red on the table, it is important to remember the data is compared to a record December in 2020 with December 2021 the second highest ever observed despite the year-over-year losses."
Whole milk powder imports took the biggest hit, says HGD, down 38 percent. Skim milk powder was down 21.6 percent, and whey products were down 31.9 percent, a 20-month low.
Bloomberg reports that China's hog herd has rebounded and is now at a six-year high of 449 million, so with the country no longer aggressively building their herd there has been a slowdown in whey demand for piglets, according to HGD.
Staying in the global market, EU November exports were up 1.7 percent from 2020, according to StoneX, which was stronger than the minus 1.3 percent they forecast. "Exports to China are still rather weak, seeing a month-to-month decrease of 23 percent," said StoneX, "but other countries such as Indonesia, Nigeria, Philippines and the U.S. are making up for that. Shipments to Indonesia rose 57 percent month to month and up 38 percent YoY. Some of the largest month to month gains were butter, yogurt and whey protein isolates. Liquid milk exports were down from the previous month but are still strong on a YoY basis," according to StoneX.
Dairy prices here at home strengthened, except for cheese, in the Martin Luther King holiday shortened week. The Cheddar blocks closed last Friday at $1.8075 per pound, down 11.25 cents on the week, lowest since Nov. 18, 2021, 24.50 cents below its Jan. 12 peak, but 19.75 cents above a year ago when they fell 11 cents to $1.61.
The barrels, after peaking at $1.96 the previous Friday, closed last week at $1.8125, down 14.75 cents, 42 cents above a year ago, and a half-cent above the blocks. There were four sales of block on the week at the CME and two of barrel.
StoneX says it hears continued reports of tight butter and nonfat dry milk (NFDM) but not cheese. "Cheese demand is likely strong, but we have cheese out there to meet that demand. That seems to be the narrative developing this week and spot prices are reflecting that narrative." Traders await the December Milk Production and Cold Storage reports issued Jan. 24.
Dairy Market News reports that milk availability varied in the Midwest. Plants running fully staffed operations say milk is available but the discounted prices of $3 and $4 under class are no longer being offered. Still, there are plants running lighter lines, as employees are short due to COVID-related absences. Cheese sales were slowing, according to some, as prices rose and "market tones are lacking the bravado of prior weeks."
Retail cheese demand is steady to lower in the West while food service is mixed. Contacts note that rising COVID cases in the region have caused a decline in sales. Food service Mozzarella sales are, reportedly, increasing as strong demand is present for pizza making, thanks to football playoffs. International cheese demand remains strong but transportation issues caused by a shortage of truck drivers and port congestion continue to cause delays. Cheesemakers say milk is available, but delayed deliveries and labor shortages are causing some plants to run reduced schedules, according to DMN. Continuing port woes are likely hurting U.S. exports of cheese, despite our competitive prices.
Butter was firing on all cylinders, shooting to a $2.9350 per pound finish last Friday, up 21 cents, highest since Sept. 28, 2015, and $1.5325 above a year ago. Thirty-two sales transpired on the week. Butter's CME record is $3.1350 per pound on Sept. 25, 2015. The U.S. price, while above the GDT, is below European levels.
Midwest churners are calling for cream and have been very active since before the holidays. Freight continues to be the biggest hurdle, particularly moving cream from Idaho and the Mountain States. Butter sales have begun to settle. The holidays were very busy, but prices have caused buyer hesitancy.
Western cream demand is unchanged. Loads of cream are heading to the Midwest though some faced delays from bad weather and a shortage of truck drivers. Butter demand is strong in domestic and international markets and inventories are tight. Butter makers are running below capacity due to labor shortages and delayed deliveries of production supplies, according to DMN.
Grade A nonfat dry milk climbed to $1.85 per pound last Tuesday, highest since June 12, 2014, but closed last Friday at $1.8150, unchanged on the week, but 64.25 cents above a year ago, on seven sales for the week.
Dry whey closed at another new record high, 80 cents per pound, up 3 cents on the week and 26 cents above a year ago, with two sales reported at the CME.
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