U.S. Butter Churns Running Hard; Cheddar Prices Under Pressure
Published: Friday, June 16, 2023
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
You'll recall April milk production was only up .3% from 2022. The April Dairy Products report shows that most of the extra milk went to the churn.
Cheese production totaled 1.171 billion pounds, down 4.9% from March and .2% below April 2022, the second month in 2023 with a year-over-year decline. Output for the four-month period hit 4.7 billion pounds, up just .7% from the same period a year ago.
Italian cheese totaled 478.3 million pounds, down 6.7% from March and 2.6% below a year ago. American output fell to 488.2 million pounds, down 2.1% from March but up 2.3% from a year ago. Mozzarella totaled 381.7 million pounds, down 1.3% from a year ago. Lower Mozzarella output is likely due to weaker exports, says StoneX, and may have pushed more milk into Cheddar production.
Cheddar has been under pressure at the CME. Output slipped to 346.2 million pounds, down 2 million, or .6%, from March but up 19 million pounds, or 5.8%, from April 2022. YTD Cheddar stood at 1.37 billion pounds, up 4.1% from 2022.
Butter output fell to 195 million pounds, down 10 million pounds, or 4.9%, from March but was up 13.7 million pounds, or 7.6%, from a year ago. YTD butter output stood at 788.5 million pounds, up 3.3% from a year ago.
The June 5 Daily Dairy Report said, "Churns in the Central region ran particularly hard as butter output in that area climbed 13.7%. However, butter production in the Atlantic and Western regions were also up by 4.6% and 3.8%, respectively."
Yogurt production totaled 385.6 million pounds, up 3.1% from a year ago, and hard ice cream output slipped to 61.4 million pounds, down 6.1% from 2022.
Dry whey production totaled 80.8 million pounds, up 3.3 million pounds, or 4.2%, from March and up 1.4 million pounds, or 1.7%, above year ago. YTD whey is at 302 million pounds, up 1.2%. Stocks grew to 79.5 million pounds, up 11.7 million, or 17.3%, from March and 7 million, or 9.7%, above a year ago.
Nonfat dry milk output inched up to 199.6 million pounds, up 200,000 pounds, or .1%, from March and up 3.8 million, or 1.9%, from a year ago. Stocks slipped to 309.2 million pounds, down 3.4 million pounds, or 1.1%, from March, but were up 10.1 million pounds, or 3.4%, from a year ago.
U.S. nonfat is the least expensive on the world market, says StoneX, so that should continue to help exports.
Skim milk powder production totaled 34.5 million pounds, down 800,000 pounds, or 2.1%, from March, and 10.1 million pounds, or 22.6%, below a year ago.
Speaking of exports, April data shows they are having a tough time keeping pace with prior year levels, according to HighGround Dairy, with a notable shift lower continuing to be observed to South Korea and Southeast Asia.
Cheese exports totaled 80.5 million pounds, down 11.7% from 2022. South Korea recorded the largest drop, says HGD, while losses to Southeast Asia were primarily nonfat-skim milk powder. "Losses to Asia have dominated the narrative, though gains were noted to Latin America, primarily nonfat dry milk to Mexico."
Cheese to South Korea dropped below year-ago levels for six consecutive months with April volumes the lowest for the month in seven years. Weaker shipments were also recorded to Japan for the third month in a row as it turned to New Zealand to fill its needs, reports HGD. The good news is that Mexico imported the most cheese on record for the month, "a monthly trend that has remained intact for the past six months."
Butter exports fell to 4.6 million pounds, down 53.7%. They were the lowest since November 2020, according to HGD, driven by a steep drop to South Korea, followed by Canada and Mexico. U.S. butter was priced well above Oceania for much of 2022, according to HGD, which drove business to New Zealand from Asian buyers, as well as North American trade partners.
Dry whey exports, at 34.5 million pounds, were down 8%. HGD reported that buying from China was almost half of March volumes. "For the first time this year, shipments fell below prior year levels despite impressive sales to Southeast Asia that were the highest since March 2011."
As I have said in the past, China remains the elephant in the room in world trade and it is not fully engaged yet, but that may be changing. StoneX June 5 "Early Morning Update" reported, "Chinese milk production has slowed down even faster than expected. Reported milk collections in April were only up 1.7% from last year after averaging 11% growth in January and February. Farmgate margins are at a record low and spot milk prices remain under pressure. The slowdown in reported milk collections is theoretically supportive for the global dairy markets and it is worth watching as a bullish risk, but even at 1.7% growth the Chinese market seems to be oversupplied."
Broker Dave Kurzawski added in the June 12 "Dairy Radio Now" broadcast that the fallback in exports is in line with other commodities reported in the Consumer Research Bureau, plus China has a different mindset post COVID than the U.S. Their economy is not bouncing back like we thought it would six months ago, he said. People there are not spending money like here in the U.S. They're nervous about their jobs and the economy and are putting money away, not spending it.
Whole milk powder provided a downward pull in the June 6 Global Dairy Trade auction. The weighted average was down .9%, following the .9% decline on May 16. Just under 51 million pounds of product was sold, up from 47.5 million on May 16. The average metric ton price slipped to $3,399, down from $3,488 on May 16.
Whole milk powder was down 3%, after it inched up .3% in the last event. Buttermilk powder was down 2.4%, while skim milk powder was unchanged. Cheddar jumped 7.4% after dropping 3.4% May 16. Anhydrous milkfat was up 1.8%, after dropping 4.5%, and butter inched .5% higher, following a 2.2% rise.
StoneX says the GDT 80% butterfat butter price equates to $2.2514 per pound, up .8 cents, and compares to CME butter which closed last last Friday at $2.3625. GDT Cheddar, at $2.1175, was up 11.8 cents, and compares to last Friday's CME block Cheddar at $1.4225. GDT skim milk powder averaged $1.2498 per pound, unchanged, and whole milk powder averaged $1.4390 per pound, down from $1.4715. CME Grade A nonfat dry milk closed last Friday at $1.16 per pound.
HighGround Dairy said, "The initial auction for the new dairy season in Oceania has not reignited the market's ambition to pick a direction right away. This auction keeps the overall indicator-needle in a steady state, pointing slightly down, but within an expected range for the time being. The result could have registered lower if it were not for a few buyers chasing near term product, a factor which has also reshaped sales curves this week."
Cheese Processing
Back home, Cheddar block cheese climbed to $1.5225 per pound last Wednesday but closed last Friday at $1.4225, down .75 cents on the week and 83.25 cents below a year ago.
The barrels made it to $1.6525 last Wednesday, highest since April 6, but finished at $1.57, 5.75 cents higher but 67.25 cents below a year ago and 14.75 cents atop the blocks. Sales totaled 26 cars of block and 21 of barrel.
Midwestern cheesemakers tell Dairy Market News milk availability remains "sloppy." Mid-week spot loads ran $11 to $4 under class, but as bottlers' orders slip due to school closings, handlers are having more trouble finding homes for it. Cheese demand is steady to improving in the region and some cheesemakers questioned the price fall because their orders are, and have been active, and even near-term production is already spoken for. Cheese processing has been steadily busy, particularly as milk has been ample. DMN says cheesemakers have bullish expectations based on continued customer interest and the lighter milk availability ahead, coming into the warmer months of the year.
Western retail and food service demand is steady for varietal cheeses. Export demand ranges moderate to softer. Cheese makers are running strong production with plenty of milk available, according to DMN.
Cash butter fell to $2.36 per pound last Wednesday, lowest since May 1, but finished last Friday at $2.3625, down 8.25 cents on the week and 61.25 cents below a year ago, with 33 sales on the week, highest total since the week of Jan. 30, 2023.
Central butter makers say cream remains readily available. Multiples have begun to shore up somewhat following the Memorial Day weekend, which created a glut of cream even into last week. Churning remains active. Demand is seasonally meeting expectations, but some say demand has begun to shift slightly higher.
Western cream multiples are pushing upward, but plenty of cream is available. Churning is strong to steady, though more cream is shifting to ice cream production. Food service and retail demand is strong to steadier, but moderate to quieter demand is reported from commercial bulk buyers. Export activity is noted as moderate to quieter, says DMN.
Grade A nonfat dry milk closed last Friday at $1.16 per pound, down a penny on the week and 69.50 cents below a year ago, with 20 sales on the board for the week.
Dry whey's Friday finish was at 27.50 cents per pound, up 1.75 cents on the week, but 26.75 cents below a year ago, on 25 sales for the week at the CME.
StoneX reports that Ukraine's Ag Minister says the country "has a 'plan B' if Russia continues to block the grain export deal, excluding Russia and guaranteeing shipment via the corridor with funds built up via government coffers. Meanwhile, Russia's foreign ministry says that inspections under the deal have resumed, but they also see 'no prospects' for another renewal in mid-July."
The week ending May 27 saw 57,000 U.S. dairy cows go to slaughter, up 2,100 from the previous week and 7,100 head, or 14.2%, more than a year ago. Year-to-date, 1.338 million head have been culled, up 62,100, or 4.9%, from a year ago.
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