Cheese prices climbed with the thermometer last week as traders also weighed the Global Dairy Trade auction and May milk production, plus anticipated the June Cold Storage report.
CME block Cheddar closed Friday at $1.7075 per pound, topping $1.70 for the first time since November 2015, up 4 3/4-cents on the week, a penny above a year ago, and the highest block price since Nov. 9, 2015.
The barrels closed Friday at $1.7750, up 3 cents on the week, 11 1/2-cents above a year ago, and the highest barrel price since Nov. 19, 2014. They were also 6 3/4-cents above the blocks, a spread that grew to 9 cents Thursday. Four cars of block traded hands on the week and 16 of barrel.
Cheese prices were unchanged Monday, with no activity, but the blocks were a quarter-cent lower on Tuesday, slipping to $1.7050.
Cheese production is active in the Central region, according to Dairy Market News. Milk production is tapering off and spot loads of milk are becoming increasingly difficult to come by. Demand for cheese is strong and growing, says DMN, and “processed sales continue to do well as grilling season is at its peak.”
Butter started last week by dropping almost 3 cents, then inched back up a half-cent but gave it back Thursday, and closed Friday at $2.2925 per pound, down 2 3/4-cents on the week but 33 3/4-cents above a year ago, with 19 cars sold on the week.
The butter dropped 3 1/4-cents Monday and shed a penny and a quarter Tuesday, closing the day at $2.2475 per pound, the lowest price since June 13, 2016.
Central butter churns are active. However, “as the Midwest faces rising temperatures and humidity, cream is tightening,” reports DMN, but “contacts report that the cream supply is not as tight as they had anticipated for this point in the season” and “July butter production is reportedly more active than in previous years.”
Western butter output is “steady as butter makers work hard to fulfill current contract needs.”
Cash Grade A nonfat dry milk ended the week at 84 1/2-cents per pound, down 3 cents but 10 1/2-cents above a year ago, on 16 cars sold on the week.
It was unchanged Monday but lost three-quarters Tuesday, slipping to 83 3/4-cents per pound.
June milk production in the top 23 producing states hit 16.7 billion pounds, up 1.6 percent from June 2015, according to preliminary data. The 50-state total, at 17.8 billion pounds, was up 1.5 percent. Revisions lowered the original May estimate by 2 million pounds, now put at 17.4 billion pounds, up 1.2 percent from a year ago. That is USDA’s second downward revision in a row.
June cow numbers in the 23 states totaled 8.65 million head, up 3,000 from May and 17,000 more than a year ago. Output per cow averaged 1,926 pounds, up 26 pounds from a year ago.
California was down only 1 percent from 2015 in June, milking 8,000 fewer cows and getting 10 pounds less per cow but June was the 19th consecutive month output in the Golden State was below a year ago.
No. 2 Wisconsin just about tripled California’s shortfall. Milk production was up 3.8 percent despite a loss of 2,000 cows. Output per cow was up 75 pounds from a year ago.
New York was up 4.2 percent, on a 75-pound gain per cow and 2,000 more cows. Idaho was up 2.3 percent on a 30-pound gain per cow and 5,000 more cows. Pennsylvania was up 0.6 percent on a 10-pound gain per cow, and Minnesota was up 2.1 percent on a 25-pound gain per cow and 3,000 more cows.
Michigan was up 5.4 percent, thanks to 11,000 more cows and 55 pounds more per cow. New Mexico was down 3.5 percent, on 13,000 fewer cows, though output per cow was up 10 pounds. Texas was up 3.8 percent on a 45-pound gain per cow and 6,000 more cows than a year ago. Washington state was again unchanged across the board.
The Agriculture Department announced the August federal order Class I base milk price at $15.07 per hundredweight, up $1.37 from July but $1.21 below August 2015. It is the highest Class I since January 2016 and equates to about $1.30 per gallon, up from $1.18 in July. The eight-month Class I average now stands at $14.10 per cwt., down from $16.33 at this time a year ago and $23.13 in 2014.
Record amounts of cheese and butter remain in storage. The latest Cold Storage report shows June 30 butter stocks at a record 326.0 million pounds, up for the seventh consecutive month, up 1.1 million pounds from May, and 70 million pounds or 27 percent more than June 2015.
FC Stone’s Dave Kurzawski points out that the average drawdown of butter stocks in June the past five years was 4.1 million pounds and average holdings were about 84 million pounds lighter than we have today, but “this time around, we added 1.1 million.”
American cheese, at 758.6 million pounds, was also up about 1,000 pounds from May but 72.8 million pounds, or 11 percent, above a year ago. The total cheese inventory hit 1.25 billion pounds, up just 2.2 million pounds from May but 10.9 million pounds or 10 percent above a year ago.
“I don’t view the report as bullish, not even neutral, considering the pricing action in June,” Kurzawski said. “The U.S. American cheese supply is still running about 91.9 million pounds heavier than the five-year average.”
HighGround Dairy’s Eric Meyer concurs on the abundant supply: “The data speaks for itself and the volumes get even more bearish when comparing this report’s total cheese and butter stocks versus two years ago.”