Cash dairy prices mixed in active trading

Lee Mielke

CME cash cheese and nonfat dry milk prices headed south last week as cheese in particular was making its way to Chicago. Butter moved higher but things are changing this week.

The Cheddar blocks closed the 4th of July holiday shortened week at $1.62 per pound, down 2 cents on the week and 34 3/4-cents short of last year’s level. They were unchanged Monday but jumped 2 1/4-cents Tuesday, to $1.6425 per pound.

Cheddar barrels closed Thursday at $1.5825, down 4 1/4-cents on the week and 40 1/4-cents below a year ago. They lost three-quarters of a cent Monday but were unchanged Tuesday, holding at $1.5750, a higher than normal 6 3/4-cents below the blocks. Eleven cars of block traded hands last week and 29 of barrel, the seventh consecutive week that barrel traded was at double-digit levels.

Dairy Market News reports that “strong cheese sales have been normal in the Midwest for some time and that is contributing to some manufacturers playing more hardball in price negotiations. DMN adds that “profitability is looking good this year for Midwest cheese manufacturers as the halfway point of the year is reached. The overwhelming majority of comments looking forward a few months are confident about selling however much cheese a plant can make. Some plants are reporting that components are beginning to decline, not in any alarming way, from recent weeks, as is seasonally normal. In much of the region the weather has been excellent for cows.”

This has also led to a good crop year, with second cutting of hay alfalfa completed in much of Wisconsin. Corn in some areas was nearly shoulder high by the 4th of July. These factors are working together, in the opinion of cheesemakers, to contribute to expected good milk production over the next few months, according to DMN.

Cash butter was moving higher, closing Thursday at $1.94 per pound, up 2 1/2-cents on the week but 45 cents below a year ago. It gave back a half-cent Monday and lost a penny Tuesday, slipping to $1.9250. Eight cars found new homes last week.

“Churn rates are declining as cream levels tighten,” says DMN. “Some manufacturers are selling excess cream instead of churning due to current pricing. Retail butter demand is steady to lower. Export interest remains weak.”

“Butter production in the West has slowed somewhat as some manufacturers are willing to sell cream and milk. The seasonal increase of ice cream production has pulled cream away from butter making, while milk is being diverted to keep cheese production full. Consumer demand for butter remains steady.”

Cash Grade A nonfat dry milk closed Thursday at 83 1/4-cents per pound, up a quarter-cent on the week but 93 3/4-cents below a year ago. The powder dropped a penny and a quarter on Monday and held there at 82 cents per pound on Tuesday. Twenty-five cars were sold last week at the CME.

Last week’s Global Dairy Trade auction saw the weighted average for all products offered drop 5.9 percent, following a 1.3 percent dip June 16, and 4.3 percent June 2. This is the eighth consecutive session of loss and the biggest since May 1, 2015, when it plunged 10.8 percent.

The declines were led by whole milk powder, down 10.8 percent, following a 0.1 percent loss last time. Buttermilk powder was next, down 8.1 percent, following a 10.0 percent jump last time. Skim milk powder was down 5.8 percent, off 0.2 percent last time. Cheddar cheese was down 4.9 percent, after a 2.4 percent increase last time. Rennet casein was down 4.1 percent, after a 4.3 percent boost last time, and butter rounded out the losses, off 0.3 percent, following a 3.3 percent increase last time.

FC Stone reports the average GDT butter price equated to about $1.2222 per pound U.S., down from $1.2280 in the June 16 event. Contrast that with CME butter, which closed Tuesday at $1.9250 per pound. GDT Cheddar closed at $1.3881 U.S., down from $1.4187 last time. CME Cheddar closed Tuesday at $1.6425. GDT skim milk powder, at 85.07 cents per pound U.S., was down from 89.71 cents last time, and the whole milk powder average at a GDT record low 93.18 cents per pound U.S., is down from $1.0556 in the last event. The CME Grade A nonfat dry milk price closed Tuesday at 82 cents per pound.

You’ll recall that May milk production totaled 17.2 billion pounds, according to USDA’s preliminary data, up 1.4 percent compared to May 2014. The latest Dairy Products report shows where that milk went — and didn’t. Total cheese output hit 988.6 million pounds, up 1.8 percent from a year ago, with year-to-date production at 4.8 billion pounds, up 2.2 percent. That’s a record high for May, according to the Daily Dairy Report.

Italian cheese output hit 423.2 million pounds, up 1.9 percent, with YTD at 2.1 billion pounds, up 2.1 percent. Mozzarella, at 337.9 million pounds, was up 2.1 percent and YTD totaled 1.7 billion pounds, up 1.1 percent.

American type cheese totaled 400.6 million pounds, up 1.6 percent, with YTD at 1.9 billion, up 2.6 percent. Cheddar output amounted to 290.1 million pounds, up just 0.4 percent; with YTD at 1.4 billion, up 1.5 percent. The American cheese category includes Cheddar, Colby, Monterey and Jack cheeses, according to the DDR, and is dominated by Cheddar, which typically accounts for about 72 percent of the category.

Churns put out 169.5 million pounds of butter in May, up 1.9 percent but YTD, at 833.8 million pounds, is still down 2.0 percent.

Nonfat dry milk totaled 178.2 million pounds, up 9.9 percent, with YTD output hitting 855.8 billion pounds, up 11.1 percent. Less milk went to skim milk powder which totaled 36.7 million pounds in May, down 38.3 percent, with YTD output at 186.8 million pounds, down 25.2 percent.

The report also shows nonfat dry milk stocks at 261.0 million pounds, as of May 31, up 13 million or 5.2 percent from April and 18 percent above a year ago.

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