Cheese prices continue to sink

Lee Mielke

Cheese prices fell last week taking futures with them, but then rallied a bit. Block Cheddar fell to $1.47 per pound last Wednesday, the lowest price since June 26, 2018, but closed Friday at $1.5150, up 1 3/4-cents on the week and ending three weeks of decline, but still 23 cents below a year ago.

The barrels plunged to $1.2075 Wednesday, lowest price since June 27, 2018, and an earshot away from a 9-year low. They finished Friday at $1.25, down 1 3/4-cents on the week and 45 1/2-cents below a year ago.

The blocks held at Friday’s close Monday while the barrels rolled 1 3/4-cents lower. The blocks inched a quarter-cent lower Tuesday, to $1.5125, as traders anticipated Thursday’s September Dairy Products report. The barrels climbed 1 1/2-cents Tuesday, hitting $1.2475, putting the spread at a still too high 26 1/2-cents.

FC Stone dairy broker Dave Kurzawski wrote in his Oct. 23 Early Morning Update: “This is the first time in 12 years that the price of barrel cheese fell below $1.30 during the month of October.” He also points out that the 10-year October block price average is $1.7761, far above where it is today.

There is plenty of milk being produced, along with plenty of cheese, plenty in inventory, and with cheese prices falling, buyers will likely hold off some of their purchases, not having to be concerned over shortages and big price rises ahead.

HighGround Dairy’s Lucas Fuess pointed out in the Oct. 29 “Dairy Radio Now” broadcast that, even though dairy commercial disappearance and exports are strong, that hasn’t been enough to help the barrel cheese price. Most exports are blocks, he explained, and that has contributed to the big price spread between them.

Dairy Market News warns that some Midwestern cheesemakers are beginning to build inventories as buyers hesitate to take on extra cheese while markets falter. Cheese producers have generally had a healthy demand season and new customers are showing interest. Retail demand and prices have also shown relative stability. But, record price splits between process cheese and blocks, followed by continuing price slides “have taken their toll.”

Western cheese makers say there is a lot of milk and a lot of cheese. Inventories are heavy, especially for barrels and mozzarella. Demand is good, but not great and it has taken some time for holiday retail demand to get started. “Export sales seem to ebb and flow according to price, with processors’ phones ringing more as cheese prices fall.”

Spot butter fell to $2.1950 per pound last Tuesday, lowest price since Sept. 5, 2018, but closed Friday at $2.2325, down 2 3/4-cents on the week and 7 cents below a year ago.

Monday’s butter lost three-quarters and stayed there Tuesday at $2.2250.

FC Stone blames continued weakness in the world fat market “finally spilling over in the U.S.” DMN reports that cream remains tight in the Midwest, thus some churns are running solely to meet contract needs.

The western butter market undertone seems to be strong. Several reports suggest that buyers are looking to purchase butter for the upcoming holidays and baking season. Retail and food service orders are more solid as buyers replenish inventories.

Grade A nonfat dry milk inched a half-cent lower last week, to 86 3/4-cents per pound, 11 3/4-cents above a year ago.

The powder was unchanged Monday and Tuesday.

Cash dry whey saw the biggest drops ever in its seven-month existence, losing a nickel last Monday and again Tuesday, falling to 47 1/2-cents per pound, lowest price since Aug. 23. It closed Friday at 47 cents per pound, down 10 1/2-cents on the week, with 24 loads exchanging hands on the week.

The whey was unchanged Monday but dropped 1 3/4-cents Tuesday, to 45 1/4-cents per pound.

FC Stone points out that, up until last week it took 3 months for the whey to accumulate over 20 trades.

Dairy culling declines

Dairy cow culling dropped in September and trailed that of a year ago, according to the Agriculture Department’s latest Livestock Slaughter report. An estimated 247,400 head were slaughtered under federal inspection, down 32,300 from August and 2,200 below a year ago. A total 2.3 million head have been culled in the nine-month period, up 99,200 head or 4.4 percent from 2017.

A higher U.S. All Milk price average nudged the September milk feed price ratio a little higher, highest level since January 2018, though feed prices crept higher as well. The Agriculture Department’s latest Ag Prices report shows the September ratio at 2.10, up from 2.03 in August but down from 2.46 in September 2017.

The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk today purchases 2.10 pounds of dairy feed containing that blend.

The U.S. All-Milk price averaged $16.70 per hundredweight, up 80 cents from August but $1.20 below September 2017.

New Mexico again had the low end at $15.00, followed by Michigan at $15.40. California was at $15.97, up 52 cents from August; and Wisconsin was at $17.40, up $1.20 from August.

The national average corn price in September averaged $3.39 per bushel, up 3 cents from August and 12 cents per bushel above September 2017. Soybeans averaged $8.77 per bushel, up 18 cents from August but 58 cents per bushel below a year ago. Alfalfa hay averaged $180 per ton, up $3 from August and $31 per ton above a year ago.

Looking at the cow side of the ledger; the September cull price for beef and dairy combined averaged $60.80 per cwt., down $2.20 from August, $9.10 below September 2017 and $10.80 below the 2011 base average of $71.60 per cwt.

Milk cows averaged $1,230 per head in October, down $90 per head from July, and $380 below October 2017. They averaged $1,200 in California, down $100 from July and $400 below a year ago. Wisconsin cows averaged $1180 per head, down $70 July and down $430 per head in October 2017.

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