Cash climbs then falls

Lee Mielke

CME Cheddar block cheese finished September at $1.69 per pound, up 5 1/2-cents on the week but 4 1/2-cents below a year ago and a half-cent below where it was on Aug. 31.

The barrels closed the week and the month at $1.3825, 2 1/4-cents higher on the week, 31 cents below a year ago, and 26 1/4-cents below its Aug. 31 perch. This was the second week in a row there were no blocks traded at the CME as opposed to 38 of barrel. Only 16 cars of block were traded on the month compared to 97 cars of barrel.

Monday’s traders were pondering the announcement that the U.S. and Canada forged an 11th hour agreement to keep the North American Free Trade Agreement a three-country pact. It will be referred to as the U.S. Mexico, Canada Agreement, or USMCA.

However, no end is in sight in the China trade war.

The blocks jumped 5 3/4-cents Monday, hitting $1.7475, highest CME price since Nov. 1, 2017, then fell 3 3/4-cents Tuesday, to $1.71.

The barrels gained 3 3/4-cents Monday and gave back 3 1/2-cents Tuesday, slipping to $1.3850, an unsustainable 32 1/2-cents below the blocks, a spread that topped a previous decade high of 30 cents.

Producers of gift-packaged cheeses are taking in more milk to meet increasing demand, according to Dairy Market News. Spot milk is accessible but most is at a premium, ranging from Class to $1.50 over but some milk handlers suggest premiums could go over $2 in the near term.

A fly in the ointment is that cheesemakers, particularly those who ship out of their respective states, suggest that freight has become a logistical nightmare and relay that required electronic logs are making it harder to find available haulers at practical price points.

Western contacts report strong domestic retail and food service demand are lending support to block prices. Some processors that make packaged retail goods say they are “over committed through the end of the year.” Football season pizza sales are helping clear stocks of stored mozzarella but the Cold Storage report showed that other natural cheese stocks, which includes mozzarella, were at record highs for August. Export demand is mixed. Some sellers say cheese is moving well, but others suggest persistent concerns about trade issues have diminished interest.

Butter also strengthened last week, closing at $2.32 per pound, up 8 1/2-cents on the week, a half-cent above a year ago, and is up 10 1/2-cents on the month. There were 26 cars of butter sold on the week and 75 on the month.

Monday’s butter lost 2 1/4-cents but then jumped 3 3/4-cents Tuesday, hitting $2.3350, the highest since Aug. 15, 2018.

Some butter producers are running churns only to meet current contractual needs. Butter sales remain steady week over week, while supply reports range from balanced to longer. The market tone is steady to bullish.

Cream is available for day-to-day churning in the West and butter output is stable. Supplies are enough to cover current needs and participants are optimistic about holiday butter sales.

Spot Grade A nonfat dry milk closed Friday at 87 1/2-cents per pound, up a quarter-cent on the week, 4 3/4-cents above a year ago, but down a penny on the month. There were 3 carloads traded on the week and 35 for the month.

The powder inched up a half-cent Monday, hitting 88-cents per pound, then gave it back Tuesday.

Dry whey set a new record high every day last week and closed at 55 cents per pound, 3 1/2-cents higher than the previous week and up 5 cents from August 31. There were 2 sales for the last week of September and 5 for the month.

Monday’s whey was steady but gained a penny Tuesday, climbing to another record 56 cents per pound on two unfilled bids.

Tuesday’s Global Dairy Trade auction took the new trade agreement in stride but the weighted average of products offered dropped 1.9 percent, after slipping 1.3 percent Sept. 18 and 0.7 percent on Sept. 4. Product was abundant as sellers brought 92.6 million pounds to the market, up from 86.3 million in the last event and the highest total this year.

The declines were led by butter, down 5.9 percent, after inching 0.1 percent lower last time. Anhydrous milkfat followed, down 4.4 percent, after a 0.6 percent loss last time. GDT Cheddar was down 1.2 percent, following a 3.5 percent plunge, and skim milk power was off 0.3 percent, following a 1.1 percent decline.

Buttermilk powder was up 3.6 percent. It did not trade last time, and rennet casein was up 3.0, following a 1.7 percent uptick. Lactose inched up 0.6, after it slipped 0.3 percent last time.

FC Stone equates the GDT 80 percent butterfat butter price to $1.7772 per pound U.S. CME butter closed Tuesday at $2.3350. GDT Cheddar cheese equated to $1.5732 per pound and compares to Tuesday’s CME block Cheddar at $1.71. GDT skim milk powder averaged 89.88 cents per pound and whole milk powder averaged $1.2489. CME Grade A nonfat dry milk closed Tuesday at 87 1/2-cents per pound.

California’s September 4b cheese milk price is $15.62 per hundredweight, up 56 cents from August, 55 cents below September 2017, but is the highest 4b price since October 2017. It is also the second to the last 4b price that will be announced by the California Department of Food and Agriculture as the newly approved Federal order begins with the November price which will be announced by the USDA.

The nine month 4b price average stands at $14.34, down from $15.24 at this time a year ago and compares to $13.64 in 2016.

The September 4a butter-powder milk price is $14.09, up 4 cents from August but $1.60 below a year ago.

Its nine month average is at $13.57, down from $15.32 a year ago and compares to $13.26 in 2016. The last 4a milk price will also be October’s.

The September Federal order Class III and IV prices will be announced on Wednesday.

A higher U.S. All Milk price average and lower feed prices boosted the August milk feed price ratio to its highest level since January 2018. The Agriculture Department’s latest Ag Prices report puts the August ratio at 2.03, up from 1.92 in July but down from 2.51 in August 2017.

The U.S. All-Milk price averaged $15.90 per cwt., up 50 cents from July but $2.20 below August 2017.

The national average corn price in August averaged $3.36 per bushel, down 11 cents from July but 9 cents per bushel above August 2017. Soybeans averaged $8.59 per bushel, down 49 cents from July and 65 cents per bushel below a year ago. Alfalfa hay averaged $177 per ton, down $2 from July but $30 per ton above a year ago.

The U.S. milk-over-feed margin advanced 70 cents, to $7.42 per cwt., based on the dairy Margin Protection Program calculation. That is the second-highest margin of the year but still lower than any margin in 2017.

The August cull price for beef and dairy combined averaged $63.00 per cwt., down $3.80 from July, $13.30 below August 2017 and $8.60 below the 2011 base average of $71.60 per cwt.

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