Traders must not have liked what they saw in the March Milk Production report or Friday’s Cold Storage report.
CME cash block Cheddar cheese closed the fourth Friday of April at $1.4225 per pound, down a half-cent on the week and 18 3/4-cents below a year ago.
The barrels closed at $1.4250, up a penny and a half on the week but 19 1/2-cents below a year ago. Four cars of block traded hands at the CME last week and 15 of barrel.
The blocks inched a quarter-cent lower Monday and dropped 4 cents Tuesday, to $1.38 per pound, as 12 loads traded hands on the day. This is the lowest CME block price since Jan. 10, 2011.
The barrels were unchanged Monday but lost 4 1/2-cents Tuesday, also dipping to $1.38, the lowest CME barrel price since Jan. 10, 2011.
Central cheese production continues to be very active, according to Dairy Market News, and many plants are running full schedules to match the high level of milk.
“This is resulting in storage facilities filling up quickly although many central producers feel sales are keeping up with the high production while some manufacturers reported difficulties moving cheese,” according to DMN.
Western cheese output remains active with plenty of milk available. Export opportunities are somewhat limited and imports are ahead of last year’s volumes but domestic retail and food service demand remain relatively strong.
Cash butter, after jumping 16 cents the week of April 4, dropped a nickel the following week, then slipped another 4 cents last week, closing April 22 at $2.03 per pound, but still 20 cents above a year ago. Only two cars traded hands last week at the CME.
The spot price was unchanged Monday but gained a penny Tuesday, inching up to $2.04.
Central region churn operators report cream is readily available, according to DMN. “Retail orders perked up ahead of the remaining spring holidays and as consumer outlets re-evaluate butter holdings. Orders from food service increased as resort-based and traditional restaurants gear up for the vacation season. Although cream is plentiful now, butter producers continue to plan ahead for late summer coverage when cream is usually less available.”
Western churns also remain active. “Consumer demand is stable and has yet to decline much from the spring holidays. A few contacts suggest customers within the baking industry are drawing a little more butter than past years,” but inventories are “steady to building.”
Cash Grade A nonfat dry milk closed Friday at 75 cents per pound, up 2 1/2-cents on the week but 17 3/4-cents below a year ago, with six cars sold.
The powder gained a penny Monday and a penny and a half Tuesday, climbing to 77 1/2-cents per pound.
U.S. dairy cows are filling bulk tanks and processing plants around the country. March milk production in the top 23 states hit 17.2 billion pounds, up a surprising 1.8 percent from March 2015, according to USDA’s preliminary data, the highest year over year increase since last May. Output in the 50 states totaled 18.4 billion pounds, also up 1.8 percent.
Revisions added 4 million pounds to the original February estimate, now put at 15.8 billion pounds, up 4.6 percent from a year ago.
However, February 2016 had an extra “Leap Day” than February 2015. First Quarter milk output is up 2.1 percent from 2015.
March cow numbers in the top 23 states totaled 8.64 million head, up 9,000 from February and 19,000 more than a year ago. Output per cow averaged 1,993 pounds, up 31 pounds from a year ago and the highest output per cow for March since the series began in 2003.
California output was down 2.4 percent, due to 5,000 fewer cows and 45 pounds less per cow. It’s the 16th consecutive month output was below a year ago in the Golden State. Wisconsin more than made up for the shortfall, up 5.3 percent from a year ago, thanks to a 95-pound gain per cow and 4,000 more cows.
New York was up 5.5 percent, thanks to a 95-pound gain per cow and 3,000 more cows. Idaho was up 2.4 percent on a 20-pound gain per cow and 8,000 more cows. Pennsylvania was up 1.7 percent on a 30-pound gain per cow, and Minnesota put 2.8 percent more milk in the tank, on a 50-pound gain per cow.
Michigan is milking it for all it’s worth, up 7.7 percent, thanks to 13,000 more cows and 90 pounds more per cow. New Mexico went in the other direction; down 2.9 percent, on 12,000 fewer cows, the effects of winter storm Goliath. However, output per cow was up 15 pounds. The other state impacted by the storm, Texas, was up 2.0 percent, despite 6,000 fewer cows but output per cow was up 65 pounds. Washington state inched up just 0.5 percent on a 10-pound gain per cow.
Prior to the report, FC Stone’s Dave Kurzawski wrote in his April 18 Early Morning Update that “the upper-Midwest has provided ballast for some if not all of the milk production losses out West over the past year. That balancing act comes into question when we start discussing hotter summertime temperatures to come. There have been more discussions of a La Nina event to follow this winter’s El Nino. La Nina would bring about a very warm, drier Midwest summer.”
HighGround Dairy’s post analysis warned, “If this kind of herd and productivity growth is occurring with slimmer margins than seen in 2014-2015, those margins are going to need to get tighter to slow production growth.”
Dairy farmers culled more cows in March than a year ago, according to USDA’s latest Livestock Slaughter report. An estimated 261,800 head were slaughtered under federal inspection in the month, up 1,100 or 0.4 percent more than March 2015. Culling in the first three months of 2016 totaled 783,700 head, up 5,300 head or 0.7 percent from the same period a year ago.
The May Federal order Class I base milk price is $13.70 per cwt., down 4 cents from April, $2.13 below May 2015, and equates to about $1.18 per gallon. It’s the lowest May Class I price since the disastrous year of 2009. The Class I average stands at $14.18, down from $16.34 at this time a year ago and $23.05 in 2014.
March butter stocks hit 243.6 million pounds, according to USDA’s latest Cold Storage report, up 8.1 million pounds or 3 percent from February and a whopping 59.2 million or 32 percent more than March 2015.
American cheese, at 725.7 million pounds, was up 9.4 million pounds or 1 percent from February and 91.5 million or 14 percent above a year ago. The total cheese inventory stood at a record 1.19 billion pounds, up 8.4 million pounds or 1 percent from February and 122.1 million or 11 percent above a year ago.