Cash cheese prices started the first week of 2021 with the blocks losing 3.25 cents last Monday and the barrels were down 6 cents. Then came Tuesday’s GDT and the USDA food box program announcement and presto, the reversal was on.
The blocks shot up 6 cents Tuesday and closed Friday at $1.9175 per pound, up a whopping 26.75 cents on the week and 4.75 cents above a year ago.
The barrels gained 7.25 cents last Tuesday, 8.50 cents Wednesday, and finished at $1.6525, 11 cents higher on the week, 13 cents above a year ago, but 26.5 cents below the blocks. There were 36 cars of each that traded hands last week at the CME.
Monday’s block price was up 4.50 cents, with 8 cars exchanging hands, hitting $1.9625 per pound, the highest since Nov. 12, 2020, but it backed down 0.50 cents Tuesday on an offer, to $1.9575.
The barrels were unchanged Monday, with 4 sales reported, but they rolled down 0.25 cents Tuesday, to $1.65, 30.75 cents below the blocks.
Class III futures moved sharply higher as well but backed down some Monday. The January contract settled at $16.55; February, $19.43; and March at $19.05 per hundredweight.
Central cheese producers are very busy, says Dairy Market News, with some plants reporting staff shortages, particularly those in more rural areas. The shortages were not solely due to COVID-19. Contacts pointed to running six- and seven-day workweeks over the holidays as a hurdle, but there were few options, considering the surplus of milk. Spot milk prices were at or near holiday levels.
There was good news regarding demand. Although some cheesemakers reported some softening from Eastern customers due to COVID-19 related restrictions, others said interest had shifted higher. Cheese market tones were positive following news of the continuation of food box programs, says DMN.
Manufacturers say sales for western cheese going into pizza have been strong throughout the fall and winter and many think that will continue for the near term. Retail orders are firm as grocers restock shelves following the holidays and, while food service demand is still sluggish, some think the food box resumption will help clear cheese stocks, which are balanced to heavy.
Some contacts think market speculators are making purchases and putting cheese into storage within a cash and carry strategy. Manufacturers report that production is active with plenty of milk for the cheese vats.
Spot butter was caught in the updraft after dropping Monday to $1.3950 per pound. It gained 5.25 cents Tuesday but then fell Wednesday, and finished Friday at $1.38, down 4 cents on the week and 54 cents below a year ago, with 14 carloads trading places.
The butter meltdown continued Monday, shedding 7 cents, and paused there Tuesday at $1.31, the lowest since May 8, 2020.
The USDA issued Section 32 solicitations for butter to be delivered in February and March, according to StoneX, but the volume was about half of what they were expecting; 5.2 million pounds, versus the 12.5 million StoneX expected.
Butter markets got a boost from the food box news, says DMN. Central churning resumed following the holidays, as there’s lots of cream available, both locally and from the west. Some managers said cream trucks were lined up in some cases outside their plants. Foodservice butter sales are well below last year but plants are waiting for customers to settle in following the holidays.
Western butter sales have quieted. Retailers are restocking shelves but orders are coming in sporadically. Foodservice demand is weak. Butter production is active and manufacturers have ample supplies of cream. Western butter stocks are heavy, especially for bulk butter, says DMN.
Grade A nonfat dry milk closed Friday at $1.19, up 4.75 cents on the week but 8.25 cents below a year ago, with 27 cars exchanging hands last week.
Monday’s powder was down a half-cent and held there Tuesday, at $1.1850.
StoneX says November powder stocks were higher than expected and exports were lower than expected and thus question the price strength, but suggest, “The price action is keeping pace with global strength.”
CME dry whey marched to a Friday close at 50 cents per pound, 3.75 cents higher on the week, highest since Jan. 18, 2019, and 15.25 cents above a year ago. Only 2 sales were reported last week at the CME.
The whey was unchanged Monday and Tuesday.
Production estimate raised
U.S. dairy farmers are indeed “milking it for all it's worth,” prompting the Agriculture Department’s first World Agricultural Supply and Demand Estimates report (WASDE) of 2021 to raise its milk production estimates for the fifth consecutive month, citing growth in milk per cow and higher dairy cow numbers.
2020 production and marketings were estimated at 222.9 billion and 221.9 billion pounds, respectively, up 200 million pounds on both from the December estimate. If realized, 2020 production would be up 4.5 billion pounds, or 2.1%, from 2019.
2021 production and marketings were estimated at 226.7 billion and 225.7 billion pounds, respectively, up 400 million pounds on both. If realized, 2021 production would be up 3.8 billion pounds, or 1.7%, from 2020.
Cheese, butter, nonfat dry milk, and whey price forecasts for 2021 were raised from last month on firm domestic demand. The 2021 Class III milk price and Class IV prices were raised from the previous month on the higher product prices.
Look for a 2021 Class III average of $16.90 per cwt., up $1.30 from what was projected a month ago, and compares to the 2020 average of $18.16, $16.96 in 2019, and $14.61 in 2018.
The Class IV average was estimated at $14.10, up 50 cents from last month’s projection and compares to $13.49 in 2020, $16.30 in 2019, and $14.23 in 2018.
More powder and butter
You’ll recall that November milk output totaled 18.0 billion pounds, up 3.0% from November 2019. The latest Dairy Products report shows where the milk went.
Cheese output totaled 1.1 billion pounds, down 2.7% from October and just 0.6% above November 2019. Year-to-date cheese output was at 12.1 billion pounds, up 0.4% from a year ago.
Wisconsin produced 275.5 million pounds of that November total, down 5.1% from October and 1.4% below a year ago. California output, at 200.7 million pounds, was up 0.2% from October and 7.7% below a year ago. Idaho, with 83 million pounds, was down 3.3% from October but 7.6% above a year ago.
Italian type cheese fell to 457.5 million pounds, down 2.4% from October and 3.1% below a year ago. YTD Italian was at 5.1 billion pounds, down 1.4%.
American type cheese totaled 449.2 million pounds, down 2.8% from October but 3.9% above a year ago. YTD American hit 4.9 billion pounds, up 2.2%.
Mozzarella output was 362.8 million pounds, down 3.3% from a year ago, and signals that pizza sales have not kept pace with prior-year levels, according to the DDR. YTD mozzarella was at 4.0 billion pounds, down 1.6% from 2019.
Cheddar, the daily traded cheese at the CME, slipped to 320.7 million pounds, down 8.3 million pounds or 2.5% from October but was 11.5 million, or 3.7% above a year ago. YTD Cheddar was at 3.5 billion pounds, up 2.8%.
U.S. churns gave us 168.3 million pounds of butter, up 2.9 million pounds, or 1.8% from October, highest November total ever, and 6.4 million, or 4.0% above a year ago. YTD butter was at 1.91 billion pounds, up a hefty 5.8% from 2019.
Yogurt production totaled 317.7 million pounds, down 0.6% from a year ago, with the YTD total at 4.1 billion pounds, up 2.2%
Dry whey totaled 70.6 million pounds, down 4.2 million, or 5.5%, from October and 4.5 million, or 5.9%, below a year ago, with YTD at 875.8 million pounds, down 2.4%.
Dry whey stocks totaled 67.3 million pounds, down 1.2% from October and 14.9% below those a year ago.
On a more bearish note, nonfat dry milk output shot up to 151.7 million pounds, up 13 million pounds, or 9.3%, from October and 12.8 million, or 9.2%, above a year ago. YTD powder was at 1.73 billion pounds, up 2.7% from 2019.
Stocks, at 250.3 million pounds, were up 15.1 million pounds or 6.4% from October and an eye-catching 27.7 million pounds, or 12.4% above a year ago.
Skim milk powder production slipped to 54.4 million pounds, down 2.8 million pounds, or 4.8% from October but 3.4 million pounds, or 6.8% above a year ago. YTD skim milk powder was at 510.2 million pounds, up a hefty 11.7% from 2019.
November U.S. dairy exports didn’t give us a lot to cheer about. Cheese exports totaled 52.8 million pounds, down 15.8% from November 2019, and saw the lowest volumes recorded since January 2017, according to HighGround Dairy (HGD), dragged lower by weak demand from Mexico, down 38%.
HGD says total dairy exports to Mexico had been below a year ago in every month in 2020. The exception was nonfat dry milk in November, which was actually stronger following four months of losses.
Nonfat dry milk-skim milk powder exports totaled 137.1 million pounds, down 7.7%, while whole milk powder exports, at 8.0 million pounds, were up 8.9%.
Dry whey totaled 37.0 million pounds, up 35.7% from a year ago, much of that due to China’s rebuilding its hog population.