Butter, cheese soaring; powder plunging

Columnist Lee Mielke wraps up the week's dairy news.


For the Capital Press

Published on August 19, 2014 11:07AM

Lee Mielke

Lee Mielke

Cash butter woke up this second week of August, after being in a holding pattern the first week and plunging 19 cents the week before that. It closed Friday, Aug. 15, at $2.66 per pound, up 26 cents on the week and an unbelievable $1.29 above a year ago when it hit the bottom for the year at $1.37 per pound.

Butter gave back 2 1/2-cents Monday but got it back Tuesday, closing again at $2.66. An astounding 59 carloads exchanged hands last week, up from 37 the week before that. Eyes will be watching to see if the spot nears the record high $2.81 per pound set in September 1998.

Cheese saw a third week of gain last week. The blocks closed Friday at $2.22 per pound, up 12 cents on the week, 44 1/4-cents above a year ago and the highest they have been since April 22, 2014. They dropped 3 1/2-cents Monday but recovered 2 1/2-cents Tuesday, to close at $2.21. The barrels finished Friday at $2.21, up 8 3/4-cents on the week and 44 1/2-cents above a year ago. They were unchanged on Monday and Tuesday. Fifteen cars of block traded hands last week and only two of barrel.

Cash Grade A nonfat dry milk continued to crash, closing Friday at $1.3975 per pound, down 14 1/4-cents on the week. They gave up another 2 1/4-cents on Monday and a penny on Tuesday, closing at $1.3650, down 28 1/2-cents in the past 12 consecutive sessions. This price has not seen this low a level since July 20, 2012. .

$2 cheese at least through August

Incredible cash prices are being seen in Chicago and continue to defy world market levels. FC Stone dairy broker Dave Kurzawski said in Friday’s DairyLine that domestic demand for cheese and butter is still strong and may continue for some time.

“I don’t know where the top of these markets will be,” he admitted. “I don’t know if anybody can answer that question, but what has happened here is that there remains a strong demand for fat and demand for butter.” Cream demand remains strong as well, he said, although cream demand has ticked down a little but “nothing too worrisome from the standpoint of the market bulls.”

Cheese has “chopped sideways, around the $2 level for several months now,” Kurzawski explained. “And now we’re starting to break back to the upside and all the bearish news globally has yet to translate into anything here domestically and so from that standpoint, if there’s still tightness the market might have to go up into a price where they’ll bring some excess inventory to the exchange.” Things are stronger than most people expect, he said, and “No one knows how long it will last but I think we will have a $2 cheese market at least through the end of August.”

The “bearish” news would appear to be the threat of rising milk production and Kurzawski says globally there’s no doubt about that and things will be changing in that regard next year in Europe and there’s concern about good weather in Australia and New Zealand as the El Nino scare “loses its steam.”

But “domestically, here we have yet to see any of these real high prices that producers are receiving really translate into much of a big milk production situation in 2014 and we’ll probably see about a 1 1/2 percent increase and that’s just not enough at this point in time,” he concluded.

Global Dairy Trade average slips 0.6 percent

Tuesday’s Global Dairy Trade auction saw the weighted average for all products slip just 0.6 percent, following the 8.4 percent drop in the Aug. 5 event, and 8.9 percent in the session before that.

The downfall Tuesday was led by a 12 percent plunge in skim milk powder, which was down 6.5 percent in the last event. Cheddar cheese was down 7.9 percent, following a 10.2 percent decline last time. Buttermilk powder was next, down 2.5 percent, following a 10.1 percent loss last time.

On the positive side, butter was up 4.9 percent, after dropping 9.6 percent last time. Anhydrous milkfat was up 3.6 percent, after jumping 6 percent last time and plunging 10 percent the time before that. Whole milk powder was up 3.4 percent, after plunging 11.5 percent last time and 10.9 percent the session before that.

FC Stone reports the average GDT butter price equated to about $1.3334 per pound U.S., up from $1.2703 in the Aug. 5 event ($1.3009/lb. on 80 percent butterfat, up from $1.2393/lb.). Contrast that to CME butter, which closed Tuesday at $2.66 per pound. The GDT Cheddar cheese average was $1.5664 per pound U.S., down from $1.6973. The U.S. block Cheddar CME price Tuesday was at $2.21. GDT skim milk powder, at $1.3034 per pound U.S., is down from $1.4804, and the whole milk powder average at $1.2720 per pound U.S., is up from $1.2360 in the last event. The CME Grade A nonfat dry milk price Tuesday stood at a two year low of $1.3650.


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