Cheddar block cheese shot up to $1.8675 per pound last Tuesday, the highest level since Nov. 22, 2016, but stayed there the rest of the week, up 4 3/4-cents on the week and 21 cents above a year ago.
The barrels finished Friday at $1.72, up 2 3/4-cents on the week, and 10 cents above a year ago, but the spread was at a still too high 14 3/4-cents.
Traders left the cheese at Friday’s close, both Monday and Tuesday, as they absorbed the USDA’s latest World Agricultural Supply and Demand Estimates report.
Dairy Market News reports that spot milk offers are “few and far between for Midwestern cheesemakers.” Some contacts relay milk loads are headed east. Loads ranged from Class to $1.50 over Class III. Cheesemakers are limiting production but order reports are “seasonally stable.”
“Some specialty cheesemakers suggest summer demand has been stronger than average,” DMN reported. “Curd and barrel producers say demand has been noticeably stronger both this and last summer. Market tones are termed ‘fair.’”
There’s still plenty of milk in the West for making cheese. Sales are generally active but not very strong. Some manufacturers are heavily promoting, hoping it will help increase sales. Recent trade agreements between the EU and other global cheese markets are a cause of concern for U.S. producers as international market shares might be affected. Inventories remain under control and the market undertone is steady compared to the previous week, says DMN.
Butter strengthened, climbing to $2.35 per pound last Tuesday, then relapsed and closed Friday at $2.3150, down a half-cent, the fourth consecutive week of loss, and was 2 1/2-cents below a year ago.
Monday’s butter was up 2 1/4-cents but it inched back a quarter-cent Tuesday, to $2.34.
Midwestern butter makers avoided the spot cream market last week, at least from sources in the region. An occasional spot load from the Southwest/Western regions was available but “additional freight costs are pushing beyond their reach,” according to DMN. Some butter manufacturers are looking to add to production schedules this week and are busy looking for affordable cream. Bulk butter has been readily available but contacts suggest that demand is “uninspired.”
Buyers are taking a step back as market prices have declined in recent weeks but there are concerns about upcoming cold storage reports. The Dairy Products report showed a June decrease in production while June’s Cold Storage report showed a 4% monthly increase in stocks. Contacts are awaiting July’s cold storage numbers and what those results will do to the markets, says DMN.
Western butter makers relay that cream is in adequate supply. A few have slowed churning schedules because it’s more advantageous to sell cream than to make butter. Retail sales are sluggish and bulk butter buyers have taken a break, waiting to see if prices may trend lower, according to DMN.
Grade A nonfat dry milk closed Friday at $1.0275, up three-quarter cents on the week and 19 3/4-cents above a year ago.
The powder was unchanged Monday but gave up a half-cent Tuesday, slipping to $1.0225.
CME dry whey closed the week at 35 1/2-cents per pound, up 1 1/2-cents but 8 3/4-cents below a year ago.
The whey was unchanged Monday and Tuesday.
The Agriculture Department lowered its 2019 and 2020 milk production estimates in the latest World Agricultural Supply and Demand Estimates (WASDE) report based on expectations of a smaller dairy herd and slower growth in milk per cow.
2019 production and marketings were estimated at 217.9 billion and 216.9 billion pounds, respectively, down 300 million pounds from last month’s estimate. If realized, 2019 production would be up just 300 million pounds or 0.1% from 2018.
2020 production and marketings were estimated at 221.4 billion and 220.3 billion pounds, respectively, down 400 million and 500 million pounds, respectively, from last month’s estimates. If realized, 2020 production would be up 3.5 billion pounds or 1.6% from 2019.
The 2019 Class III milk price forecast was raised on higher forecast cheese and whey prices. Look for an average of $16.30 per hundredweight (cwt.), up 25 cents from last month’s estimate and compares to $14.61 in 2018 and $16.17 in 2017. The 2020 average is now put at $16.55, down a dime from last month’s estimate.
The 2019 Class IV forecast was reduced as the lower forecast NDM price more than offsets the higher butter price. It is now projected to average $16.30 per cwt., down 15 cents from last month’s estimate, and compares to $14.23 in 2018 and $15.16 in 2017. The 2020 average is pegged at $16.45, down 30 cents from what was expected a month ago.
The updated Crop Production report rattled the corn and soybean markets. The report showed corn production at 13.9 billion bushels, down 4% from 2018 but a surprise considering the rains that covered so much of the corn planting areas of the country. Based on conditions as of Aug. 1, yields are expected to average 169.5 bushels per harvested acre, down 6.9 bushels from 2018 but 3.5 bushels above its July estimate.
Farmers planted 90 million acres of corn, 1% more than last year and up from the 88 million acres analysts were expecting. If these estimates are realized, corn production would hit 13.9 billion bushels, up from the expected 13.2 billion. Analysts were also expecting slightly lower yields. However, planted acres were estimated at 76.7 million acres, well below the estimate of 81 million and 14% lower than a year ago.
Soybean production was forecast at 3.68 billion bushels, down 19% from 2018 and below the expected 3.8 billion bushels. Based on conditions as of Aug. 1, yields are expected to average 48.5 bushels per harvested acre, down 3.1 bushels from 2018 but unchanged from the July estimate. Area harvested for beans was forecast at 75.9 million acres, down 4% from the previous forecast, and down 14% from 2018.
FC Stone stated that the report “caused a mass of indiscriminate selling,” driving corn prices down 6%. “Logic went out the window,” it says, “with the 90.0 million-acres-planted announcement. They even raised corn yield estimates from 166 to 169.5. These will be aggressively debated in the coming weeks and it likely will take actually harvesting this crop to know what we’re dealing with. But in the moment, this is all about emotional selling due to a bearish surprise set upon a back-drop of a massive trade war. When calmer heads prevail, and they will, we think the market will trade back over $4.00, possibly by the end of the week,” says FC Stone.