Mielke: Dairy prices dive

Lee Mielke

Cash dairy prices could draw no strength from last week’s Global Dairy Trade auction and most fell the following day and then some.

Block Cheddar cheese closed Nov. 9 at $1.38 per pound, down 7 3/4-cents on the week, the lowest CME price since March 16, 2017, and 33 cents below a year ago. The barrels finished at $1.3050, 3 1/2-cents lower and 44 3/4-cents below a year ago.

The blocks lost 3 cents Nov. 12, slipping to $1.35 per pound, lowest CME price since May 25, 2016, then regained 2 1/4-cents Nov. 13, clawing back to $1.3725. The barrels picked up a penny and a quarter Nov. 12 and tacked on 3 3/4-cents Nov. 13, hitting $1.3550, re-establishing a more typical spread of 1 3/4-cents below the blocks.

Dairy Market News reports that spot milk loads bound for the cheese vat are “diminishing” and a growing number of cheesemakers say they will forgo the spot market until after the Thanksgiving holiday, when discounts are expected to reappear. Milk was also less available week over week, and milk handlers report getting requests that are impossible to fill on a regular basis. Spot milk prices ranged from $1 to $2 over Class. Some cheesemakers suggest that markets are negatively affecting sales. Others say little to no change has occurred since the price downslide began, and sales are “steady to improved. “

Western cheese output continues at a brisk pace with ample milk flowing to the vat. “While teams playing on the gridiron have put fans into the mood for pizza and marketers say retail and food service cheese sales have been solid, manufacturers are eager to see a demand increase for the holidays,” says DMN. “So far, buyers have stayed mostly on the sidelines and the sales bump has yet to fully materialize. Exports have also not met expectations. Price dips may prompt some immediate activity, but not to the level desired. As a result, inventories remain heavy and are not clearing as anticipated.”

Butter saw a Nov. 9 close at $2.1925 per pound, down 10 3/4-cents on the week, lowest since Sept. 5, 2018, and 6 1/4-cents below a year ago. Only 6 cars traded hands on the week, down from 28 the previous week.

Nov. 12’s butter reclaimed 3 1/4-cents, then gave back 2 1/2-cents Nov. 13, slipping to $2.20.

Cream availability remains sparse in the Central region but there was a little more last week, according to DMN. “Bulk butter, like cream, is more available in the West. However, as trucking woes pervade the dairy industry, among other agricultural sectors, this is an added difficulty and expense for Midwestern butter makers. Butter markets are generally steady and range bound.”

Spot butter is available in the West and inventories are enough to meet all inquiries. Midwest cream buyers are sourcing some of their needs from the west and bulk butter is moving to the East and Midwest, but transportation issues are affecting delivery schedules. “Many processors are maxing out on print butter production. However, some are choosing to sell their stocks of cream to Class II manufacturers in lieu of churning. More cream is going to the making of holiday confectionery and ingredients. As the result, a few butter facilities are unable to find the adequate quantity of cream needed to produce butter,” says DMN.

Cash Grade A nonfat dry milk was also in the red last week, finishing at 86 cents per pound, 4 cents lower on the week but 13 3/4-cents above a year ago.

The powder price was unchanged Nov. 12 but inched up a quarter-cent Nov. 13, to 86 1/4-cents per pound.

Spot dry whey saw little change, closing Friday at 43 1/2-cents per pound, down a penny, with 16 carloads trading hands on the week.

Nov. 12 took the whey down a half-cent and so did Nov. 13, sliding to 42 1/2-cents per pound, lowest CME price since late July 2018.

The Agriculture Department lowered its 2018 and 2019 milk production estimates in the latest World Agricultural Supply and Demand Estimates report (WASDE), due to lower cow numbers; however, stronger growth in milk per cow is expected to partially offset the smaller dairy cow numbers

2018 production and marketings were projected at 217.9 and 216.9 billion pounds respectively, down 200 million pounds from last month’s estimates. If realized, 2018 production would still be up 2.4 billion pounds or 1.1 percent from 2017.

2019 production and marketings were estimated at 220.9 and 219.9 billion pounds respectively, down 500 million pounds on both. If realized, 2019 production would be up 3.0 billion pounds or 1.4 percent from 2018.

Cheese and butter price forecasts for 2018 were lowered from last month on recent price weakness, but the nonfat dry milk (NDM) price forecast was unchanged. The whey price forecast was raised. Cheese and butter price forecasts for 2019 were lowered from the previous month, but NDM and whey price forecasts were raised.

The 2018 and 2019 Class III milk price forecasts were lowered from the last month on lower cheese prices. Look for the 2018 average to be around $14.65, down 25 cents from last month’s estimate and compares to the 2017 average of $16.17 and $14.87 in 2016. The 2019 average is now projected at around $15.60, down 15 cents from what was expected a month ago.

The 2018 and 2019 Class IV prices were reduced from last month on lower forecast butter prices. The 2018 Class IV price is expected to average about $14.20, down a nickel from last month’s estimate and compares to a $15.16 average in 2017 and $13.77 in 2016. The 2019 Class IV average is projected at about $14.85, unchanged from last month’s prediction.

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