Most dairy prices confound bears

Lee Mielke

The bears found enough to feed on last week as spring began, but cheese prices pushed higher. The cheddar blocks closed Friday at $1.44 per pound, up 4 cents on the week but 5 cents below a year ago. The barrels finished at $1.39, up 2 1/2-cents on the week and 6 cents below a year ago. Nineteen cars of block traded hands last week at the CME and 23 of barrel.

The blocks inched a half-cent higher Monday but were unchanged Tuesday, holding at $1.4450. The barrels dropped 2 cents Monday and stayed there Tuesday, at $1.37, a slightly higher than normal 7 1/2-cents below the blocks.

FC Stone’s Brendan Curran wrote in Monday’s Insider Opening Bell that “Growth in milk production, heavy stocks and a lethargic international market all add ammo to the bearish camp, especially with flush on the doorstep. The larger question/issue facing the trade will be whether demand is strong enough to support prices at current levels or if the ensuing tide of milk will wash things out a bit more.”

Cheese output in the Midwest is active, reports Dairy Market News. Contractual milk supplies are generally meeting cheesemakers’ needs, however, spot offers continue to come in at Class to $3.50 under. Pizza cheese producers reported a seasonal uptick in orders and retail is steady to strong. Some suggest increased advertising and promotions have bolstered orders but cheese inventories are long.

Western cheese production is strong and moving steadily. A few manufacturers suggest sales have drawn down inventories somewhat but the consensus is that stocks are still long, especially for barrel cheese.

Cash butter shed 3 1/4-cents last week, pressured by large stocks, and closed at $2.0975 per pound, still 17 1/2-cents above a year ago. That is the lowest it has been since Dec. 15, 2016 but only five cars were sold on the week at the CME.

The resilient butter was up a quarter-cent Monday and held at $2.10 on Tuesday.

Butter production is active across the Central U.S., says DMN. Class II interest in cream has yet to affect butter makers’ accessibility. Butter demand is fair to strong and some contacts suggest recent butter related news articles have prompted some uptick in ordering.

Western production is active and stable. Demand is steady in advance of the spring holidays but buyers are expressing little interest beyond immediate needs.

Cash Grade A nonfat dry milk climbed to 84 1/2-cents per pound Thursday but closed Friday at 82 cents, up 1 1/2-cents on the week and 9 1/2-cents above a year ago. Twenty carloads were sold on the week at the CME, 17 on Friday alone.

The powder was unchanged Monday but gave back a half-cent Tuesday, slipping to 81 1/2-cents per pound.

The February Cold Storage report pegged U.S. butter stocks at a bearish 282.6 million pounds, up 61.1 million pounds or 28 percent from January and 47 million pounds or 20 percent above February 2016.

American type cheese, at 774.1 million pounds, was up 21.9 million pounds or 3 percent from January and 57.7 million or 8 percent above a year ago.

The total cheese inventory stood at 1.26 billion pounds, up 34.9 million pounds or 3 percent from January and 75.1 million or 6 percent above February 2016.

The January American cheese estimate was lowered 8.5 million pounds from last month’s report and the total inventory was lowered by 10.1 million pounds.

The April Federal order Class I base milk price is $16.05 per hundredweight, down 85 cents from March, $2.31 above April 2016, and equates to $1.38 per gallon, down from $1.45 in March. It is the lowest Class I since November 2016 and puts the four-month average at $16.78, up from $14.30 at this time a year ago and $16.47 in 2015.

The USDA surveyed butter price used in calculating the Class I value averaged $2.1932 per pound, up a half-cent from March. Nonfat dry milk averaged 85.06 cents per pound, down 13.7 cents. Cheese averaged $1.5793, down 11 cents, and dry whey averaged 52.35 cents per pound, up 3.6 cents from March.

February dairy cow culling was down from January and a little below a year ago, according to USDA’s latest Livestock Slaughter report. An estimated 253,200 head were slaughtered under federal inspection in February, down 15,900 head from January and 3,200 below February 2016, but the data is skewed because of February 2017 having one day less than February 2016.

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