Archive for Dairy Markets

CWT Assists with 3.5 Million Pounds of Dairy Product Export Sales

Cooperatives Working Together (CWT) member cooperatives accepted 16 offers of export assistance from CWT that helped them capture sales contracts for 94,799 pounds (43 metric tons) of Cheddar cheese, 41,888 pounds (19 metric tons) of butter, 597,453 pounds (271 metric tons) of cream cheese, 1.157 million pounds (525 metric tons) of anhydrous milkfat, and 1.874 million pounds (850 metric tons) of whole milk powder. The product is going to customers in Asia, Central and South America, the Middle East and Oceania. It will be delivered from August through November 2020.

CWT-assisted member cooperative export sales contracts for 2020 total 22.203 million pounds of American-type cheeses, 6.288 million pounds of butter (82% milkfat), 3.117 million pounds of anhydrous milkfat, 4.382 million pounds of cream cheese and 31.345 million pounds of whole milk powder. The product is going to 28 countries in seven regions. These sales are the equivalent of 694.6 million pounds of milk on a milkfat basis.

Assisting CWT members in moving dairy products overseas through the Export Assistance program is critical during the challenging times U.S. dairy farmers and cooperatives are facing. The Export Assistance program helps in strengthening and maintaining the value of dairy products that directly impact producers’ milk price. The program is helping member cooperatives grow and maintain world market share for U.S dairy products and is a significant factor in maintaining the total demand for U.S. dairy products and the demand for U.S. farm milk.

Dairy product and related milk volume amounts reflect current contracts for delivery, not completed export volumes. CWT pays export assistance to bidders only when export and delivery of the product is verified by required documentation.

Milk Futures Lower In Chicago Thursday

On the Chicago Mercantile Exchange, milk futures turned mostly lower Thursday with cash trade providing very little market direction. August was the only month able to post a gain in Class III.   August milk climbed 29 cents to $19.84/cwt.  September milk fell 9 cents to $16.91.  October declined 20 cents to $17.14.  November milk tumbled 31 cents to $16.91.  First half 2021 is averaging $16.33/cwt.  

It was a quiet day in the CME Cash Dairy Product Trade.  Dry whey unchanged at $0.32.  Blocks unchanged at $1.8150.  Barrels unchanged at $1.6425. Butter up $0.0175 at $1.5575.  Nine trades were made ranging from $1.54 to $1.57. Nonfat dry milk down $0.0175 at $0.9550.  Five trades were made ranging from $0.95 to $0. 9550.

The grain complex was mixed.  December corn inched ½ of a penny higher to $3.2375/bushel.  November beans fell ¾ of a penny to $8.78.  August soybean meal declined $1.60 to $280.70/ton.  September Chicago Wheat decreased 9.50 cents to $5.0125.  October Live Cattle lost 47 cents to $106.97/cwt.  September feeders dropped 60 cents to $145.87.  September crude oil fell 18 to $42.01/barrel.     

The FAO Dairy Price Index – July 2020

The FAO Dairy Price Index averaged 101.8 points in July, up 3.5 points (3.5 percent) from June. In July, quotations for all the dairy products represented in the index rose, moving the overall value 0.7 points (0.7 percent) above the corresponding month last year and for the first time above pre-pandemic level. Quotations for milk powders, especially whole milk powder (WMP), rose on account of strong import demand by Asian buyers with some concerns over the eventual size of export availabilities in Oceania in the 2020/21 production season. Meanwhile, although they remained below the pre-pandemic levels, quotations for butter and cheese continued to increase, buoyed by robust import demand amid seasonally declining export supplies and steadily rising internal demand in Europe.

Class III Bounces Back in Chicago Wednesday

Volatility continues as Class III bounces back Wednesday, on the Chicago Mercantile Exchange. Milk futures turned higher as traders worked to correct oversold positions, cash markets were mostly lower.  September Class III traded almost a $1.30 range higher and lower to settle the day in the green.  August finished the day 27 higher to $19.55, September up 33 to $17.00 and October finished 53 higher to $17.34/cwt. Fourth quarter of 2020 is averaging at $17.09/cwt as November finished 76 higher and December gained a whopping 60 cents back.  Class IV milk also surged higher. August up 23 to $13.08, Sept up 8 at $13.02, and Oct up 35 cents to $13.50/cwt.  July Class III price was announced at $24.54/cwt, Class IV at $13.76. 

This all came after a giant volume trade in the CME spot market.  Dry whey down $0.01 at $0.32.  Eight sales were made ranging from $0.3250 to $0.3325.  Blocks down $0.1150 at $1.8150.  Nine sales were made ranging from $1.8025 to $1.82. Barrels down $0.1725 at $1.6425.  Nine trades were made at $1.62 to $1.6425. Butter down $0.1150 at $1.54.  Three trades were made ranging from $1.5225 to $1.54. Nonfat dry milk up $0.0275 at $0.9725.  One trade was made at that price. 

Dairy prices plummet at GDT auction as China demand slackens

Dairy product prices plummeted at this morning’s Global Dairy Trade (GDT) auction, the main price index falling by 5.1 per cent as demand from North Asia slackened. The decline follows a smaller dip of 0.7 per cent a fortnight ago and a big jump in early July.

Whole milk powder prices dropped 7.5% overall. Regular grade WMP to ship in October fell 7.6%. 

“This was a greater decline than the NZX Dairy Derivatives market had anticipated ahead of the event,” NZX dairy analyst Amy Castleton said.

“WMP prices fell 8.2% for product for next month shipping (shipping in September), indicating that buyers have filled their urgent needs for WMP. Buying from North Asia was up against the July 21 event, and up slightly against the equivalent event last year.

“There was also a slight increase in volume purchased by Africa compared to the last event, but less than the equivalent event last year. The Middle East bought less at this event than the equivalent event last year and both South/Central America and South East Asia/Oceania bought twice as much WMP than they had at the July 21 event, suggesting there is still some demand for WMP at this price point.”

Skim milk powder (SMP) fell 4.6% while butter prices dropped 2.8%, further losing gains made in early July. 

Anhydrous milkfat (AMF) gained 3% while lactose saw a price rise of 5.7%, moving the average price to $1349/t. Cheddar prices dropped 5.3% with Africa buying the most.

 

Dairy Markets Take a Blood Bath in Chicago Tuesday

On the Chicago Mercantile Exchange a vast swath of red filled the markets on Tuesday as traders hit the sell button. Milk futures were again limit down Wednesday pressured by declining global markets and significant declines in cash trade ahead of a bearish dairy product report. Class III milk markets were beaten up hard following product trade. August collapsed $1.10, September lost the limit of $1.50 per cwt, and October was down 90 cents per cwt.  Unfortunately, the pain inflicted didn’t stop there with November off 50 cents and December through most of 2021 10-30 cents lower. Class IV markets were down 40-60 cents in 2020. 

Dry whey unchanged at $0.33.  Blocks down $0.1475 at $1.93.  Thirteen sales were made ranging from $1.93 to $2.05. Barrels down $0.2050 at $1.8150.  Five trades were made at $1.8150 and $1.87. Butter down $0.1550 at $1.4250.  Twenty-five trades were made ranging from $1.4250 to $1.50. Nonfat dry milk down $0.02 at $0.9450. 

Grains watched corn fall 8 cents to a new contract low of $3.20 per bu. Soybeans lost 14.5 to $8.81 ¾ while the wheat complex ranged from 4-12 cents in the red. 

Global Dairy Commodity Update August 2020

While dairy commodity markets in major producing regions have generally weakened, specific factors continue to influence prices, creating diverging trends.

Fundamentals are likely to steadily worsen in the coming months as milk supply expands faster year-on-year and demand slows as recession takes hold.

The YOY declines in trade are getting smaller, aided by lower prices for fats and milk powders. The coming months will likely see a continuation of major trends seen here recently – weaker cheese and butter trade due to COVID-19 exposures, alongside improved powder demand at attractive prices.

The “staggered reactivation” of food service sales is playing out. COVID-19 restrictions will continue to ease but the re-opening of foodservice outlets (seen in the US, Australia, and parts of EU) will be disrupted by “second wave” outbreaks. As was the case on the way into dealing with this pandemic, Government approaches will vary as they navigate choices between health and economic impact. This will ensure a slow and bumpy recovery in food service channels while business and tourism travel will remain limited until well into 2021.

Milk production growth in the EU and US is increasing, while domestic demand – sustained by strong grocery channel sales for cheese and butter – will be increasingly vulnerable to the effects of recession. The ongoing impacts of “trading down” by shoppers and reduced discretionary spending will weaken overall demand and increase price sensitivity.

Global protein and fat prices will generally be driven by the risk of stock-build in SMP and butter as milk supplies expand and cheese producers try to match demand. This risk is highly contingent on the sustainability of growth in cheese demand in Europe as well as prospects for increased exports, while acute tightness in the US cheese situation will gradually alleviate.

Oceania markets have been buoyed by sustained demand for WMP from China. But in this and other developing regions, butterfat and cheese demand are highly exposed to restricted food service demand, while buyers make hand-to-mouth commitments for ingredients.

Skim Milk Powder
SMP and NFDM spot values were steady through July as recovery from the COVID-19 continues.

Whole Milk Powder

Spot values have improved through July with NZ prices lifting through the month as GDT prices jumped, now selling at premium to EU product. Stronger Chinese demand at GDT events in July saw values jump significantly.

Cheese

In the US, overall cheese demand will remain under pressure. There will be a slow recovery in foodservice trade with the dire COVID-19 situation likely to extend mobility restrictions. Government purchases are likely to continue but at much smaller volumes and income subsidies are expected to taper in Q4, affecting household incomes.

Butter

Global butterfat prices continue to converge, as Oceania markets weakened due to poor demand. EU and US butter and cream prices were steady with improved retail butter demand.

Whey
Whey product prices have steadied in both the EU and US after falling in June, as COVID-19 shifted production from cheese.

The whey complex generally remains in oversupply with weak demand for higher concentrate products and expanding cheese output in the US. Dry whey prices weakened recently despite the improved trade volumes.

By Dustin Boughton, Procurement Director, Maxum Foods – Your partner in dairy
Graph Reference: Fresh Agenda

-Ends –

For more information or interviews contact:

Dustin Boughton | Director, Procurement – Maxum Foods
Ph: +61 409 629 866
dustin@maxumfoods.com

Maxum Foods

Maxum Foods is one of Australia and New Zealand’s principal suppliers of dairy ingredients to the Human Health and Nutrition, as well as the Animal Nutrition industries. Maxum Foods specialises in supplying medium to large-scale food manufacturers with high-quality dairy ingredients such as milk powders, cheese and butter. Backed by top-level technical support and a huge dairy ingredient range, Maxum Foods have open global supply channels to source exactly what our customers need.

Milk Markets Slide Lower Monday in Chicago

On the Chicago Mercantile Exchange  milk futures closed lower Monday ahead of a potentially negative Global Dairy Trade report and following big slides on the cash market. Class III milk futures fell brutally today on the heels of the spot cheese trade.  August had 72 cents squeezed out to $20.31.  September milk stumbled 68 cents lower to $18.24.  October milk declined 32 cents to $17.67/cwt.  Q4 2020 average settled at $16.99/cwt.   Class IV futures also saw weakness today.  August milk fell 6 cents to $13.27/cwt.  September milk descended 20 cents to $13.45.  October milk tumbled 34 cents to $13.68.

Spot cheese prices fell drastically in the CME cash dairy product trade.  Blocks down $0.1750 at $2.0775.  Five sales were made ranging from $2.0750 to $2.08. Barrels down $0.2150 at $2.02.  One trade was made at that price. Dry whey down $0.0125 at $0.33.  Two sales were made at $0.33 and $0.3325.  Butter down $0.0275 at $1.58.  Twenty-five trades were made ranging from $1.56 to $1.58. Nonfat dry milk down $0.0125 at $0.9650.  Six sales were made ranging from $0.9625 to $0.97.

Corn and soybeans finished slightly higher.  December corn added 1.50 cents to $3.2850/bushel.  November soybeans gained 3.75 cents to $8.9625.  August soybean meal moved $2.20 cents lower to $287.10/ton.  September Chicago wheat fell 10.25 cents to $5.21.  

Milk Futures Continue to Slide in Chicago Thursday

On the Chicago Mercantile Exchange, milk futures slid again Thursday promoted by continually declining cash trade. Class III prices fell as much as $1 per cwt during Thursday’s session but closed 27 lower in August, 62 in September, while 4th quarter prices were mainly unchanged. Class IV markets struggled as well, falling double digits. 

Cheese and milk prices experienced another rough session on Thursday after a limit move lower on Wednesday.  Blocks down $0.0250 at $2.2950.  Four sales were made at $2.28 and $2.2850. Barrels down $0.08 at $2.36.  Four trades were made at $2.3575 and $2.36. Butter up $0.0525 at $1.6075.  Three trades were made at $1.6050 and $1.6075. Nonfat dry milk down $0.0025 at $0.99.  One sale was made at $0.9950. Dry whey down $0.0025 at $0.34. 

Improving crop condition reports put pressure on corn and soybeans Monday through Wednesday but rose a half cent in corn today and three cents in soybeans. Wheat weakened 3 in Chicago, 5 in Kansas City, but gained 2 cents in Minneapolis. 

China keeps dairy prices high

Whole milk powder (WMP) prices are now sitting above pre-Covid-19 levels and New Zealand farmers can thank a resurging Chinese economy for that.

Last week’s Global Dairy Trade (GDT) auction consolidated big gains from the previous auction. WMP price rose 0.6% to US$3,218/metric tonne on the back of a whopping 14% rise in the previous auction.

Westpac senior agri economist Nathan Penny says WMP prices are now 1.8% ahead of where they sat at the end of January.

“In other words, prices have comfortably wiped out the earlier Covid-related price falls,” Penny says.

Penny says unlike other countries dealing with Covid-19, China’s economy has bounced back.

“China’s economy is back above where it was pre-Covid,” he told Rural News.

“Compare that with NZ….our economy will take years to get back to 2019 level.”

Penny says while there is a little bit of hangover from NZ’s drought last season, it’s mostly the resurgent Chinese economy that is driving dairy prices.

“There is also a strong demand from the rest of Asia but China is the key one.”

RaboResearch dairy analyst Thomas Bailey agrees that dairy price stability was been driven by strong North Asian (primarily Chinese) demand. 

China’s economy is recovering quickly, evidenced by the year on year second quarter GDP growth of 3.2%.

However, Bailey notes there is still some concern regarding China’s domestic milk powder inventories. Local milk supply in China lifted 10% in the second quarter of 2020 over last year.

Bailey says given this exceptionally strong domestic milk supply growth, it appears demand is stronger than expected and helping drive prices up.

Manufacturers are also struggling to substitute New Zealand WMP with domestic stocks due to differences in taste and colour profiles. 

“This is a dynamic we will be watching carefully as we make our way through the second half of 2020.”

$6.50 payout reaffirmed

Westpac has reaffirmed its forecast payout of $6.50/kgMS for the 2020-21 season.

Nathan Penny expects dairy auction prices to remain firm through the New Zealand winter. Prices may weaken later in the season – the peak New Zealand production months.

Upcoming auctions will see more volumes of dairy products on offer as NZ production ramps up in the coming months.

Penny says if prices hold up in the coming auctions, the bank will reassess its forecast milk price.

Fonterra this month narrowed its forecast range to $5.90/kg to $6.90/kg, lifting the bottom-end of the range by 50c.

The co-op said the lift was predominantly driven by improved market conditions in China.

For farmers, the lift in the bottom of the range has allowed Fonterra to increase its advance payments. 

Penny says the 25c lift in the forecast midpoint, $6.15/kgMS to $6.40/kg equates to $450 million of additional farm income.

Source: ruralnewsgroup.co.nz

Milk Futures Continue to Crash in Chicago

On the Chicago Mercantile Exchange milk futures continued to tumble midweek as cash trade saw some rather steep declines in prices.  Class III milk fell apart. July held at $24.42 as we enter the final days of the month, but Aug moved limit lower to 21.16, September also moved 75 lower to 19.34, and Oct – December fell 19-75 cents lower to average at $16.89/cwt.  Class IV also moved lower. July holding at 13.65, Aug fell 24 to 13.39, and Sept moved 26 lower to 13.77/cwt. 

On the spot trade dry whey unchanged at $0.3425.  Blocks down $0.12 at $2.32.  One sale was made at that price. Barrels down $0.01 at $2.44.  Butter down 0.1550 at $1.5550.  Twenty trades were made ranging from $1.5550 to $1.66. Nonfat dry milk up $0.0025 at $0.9925.  One sale was made at that price.

Grain and feed continue to slide, corn fell 4 ½ cents to 3.15 ½, November soybeans fell 2 ¼ cents to 8.85 ¼, and soybean meal lost $2 to $286.90/ton. 

Cash Dairy Markets Close Lower in Chicago Tuesday

On the Chicago Mercantile Exchange, milk futures ended Tuesday lower as did most cash markets. July was the only month in Class III to post a gain today.  July added 1 to $24.42/cwt.  August dropped 27 cents to $21.84/cwt.  September suffered a 42 cent move lower to $20.01/cwt.  October tumbled 32 cents to $18.58.  Class III Q4 average is $17.38/cwt.  Class IV prices remained relatively unchanged.   

In the CME cash dairy product trade, Dry whey unchanged at $0.3425.  Blocks down $0.04 at $2.44.  Two trades were made at $2.4475 and $2.45. Barrels down $0.01 at $2.44.  Butter down 0.0175 at $1.71.  Two trades were made at $1.71 and $1.7250. Nonfat dry milk unchanged at $0.99.  Three trades were made ranging from $0.9875 to $9950. 

The grain complex ended lower today.  December corn fell 4.50 cents to $3.30/bushel.  November soybeans declined 12.25 cents to $8.8750.  August soybean meal lost $3.60 to $288.90/ton.  September Chicago wheat was down 4.25 cents to $5.2350/bushel.  

Demand in China driving higher dairy prices

Growing demand for dairy in China has resulted in higher global dairy prices. There were significant price increases in July. The Global Dairy Trade (GDT) price index jumped early in the month by 8.3%, the biggest jump since November 2016.

There was strong demand for whole milk powder (WMP), with an increase of 14% to US$3208 a tonne at the GDT auction on 7 July. New Zealand’s Fonterra said that it had raised the lower end of its farmgate milk price forecast range for the forthcoming season as the demand went up in China, its top export market.

Local acceptance of milk and dairy products in China has grown strongly over the past year. According to the 2020 China Milk Quotient Report the growth is driven by 96% of the population believing that dairy consumption can help improve immunity. This year’s dairy product sales in China are expected to rise 6.4% to US $56.9 billion, is the forecast of market research provider Euromonitor International.

Fonterra, the world’s largest dairy exporter, recently lifted the lower end of its farmgate milk price forecast range for the current season. The 2020-2021 forecast farmgate milk price range has narrowed from US $3.59 – US $4.59 per kg milk solids to US $3.92 – US $4.59 per kg. The mid-point, off which farmers are paid, has increased to US $4.25 per kg, up from US $4.09 per kg.

Fonterra Chairman John Monaghan said the lift to the bottom end of the range was being predominantly driven by improved market conditions in China. “After an initial shock due to COVID-19, dairy consumption in China is recovering with more people spending on food,” he said. “We’re seeing customers ramp up promotional activity as they look to catch up on the sales losses incurred over lockdown.”

Monaghan pointed out that the EU and US Governments’ support measures for farmers are holding up milk production and dairy commodity prices despite the disruption they have experienced so far from COVID-19.

“While we expect these support measures to end at some point, it is likely they will continue through the peak of the New Zealand season,” Monaghan said. “While there is still a high level of uncertainty in our global markets, we do see a lowering level of risk and this supports a decision to lift the bottom end of the price range.”

According to Monaghan milk supply from the EU, US and Latin America is increasing despite the impact of COVID-19. “And there continues to be uncertainty around how the global recession and the potential for a second wave of COVID-19 globally could impact demand.” Fonterra is advising its farmers to continue budgeting with caution.

 

Most farmers across the southern export regions have started the season with some of the best seasonal conditions they have had for years. The climate outlook remains broadly favourable and trading conditions are also attractive, senior analyst Michael Harvey of Rabobank says. Dairy farmers in Australia will likely see, lower purchased feed bills and affordable fertiliser pricing. Rabobank’s revised farmgate milk price in Australia stands at US $4.51 per kg milk solids for 2020-2021.

According to Harvey the recovery in Australian milk production is gathering pace. National milk production was 6% higher for the month of May. Rabobank expects milk production in Australia to expand by 3.4% in the current 2020-2021 season.

The demand for milk and dairy products in the US improved recently with restaurants reopening, needing to restock cheese and butter. Store purchases of milk and dairy products have significantly increased as well. The US government purchased many dairy products, mainly cheese from May 15 to June 30, under the so called Farm to Family Food Box program. With the US dairy product prices below world prices, dairy exports increased as well.

Source: dairyglobal.net

Milk Futures Close Higher in Chicago Monday

Despite a softer cheese market during Monday’s CME spot dairy auction, futures ended higher on the day, on the Chicago Mercantile Exchange Monday. Milk futures were mostly up in the near term, and cash dairy prices were mostly down.   Class III milk futures jumped 35 cents in August, 22 in September, and 12 in October. November gained 4 cents while December was down 15. 2021 suffered minor losses as well. Class IV saw just August trade, losing 4 cents to $13.72. 

Dry whey was up $.0025 at $.3425 cents per pound.  One sale was recorded at that price. Forty-pound blocks were down $.06 at $2.48 per pound. There were five sales at that price. Barrels were unchanged at $2.45 per pound.  Two sales were recorded at that price. Grade AA Butter was down $.0025 at $1.7275 per pound.  One sale was recorded at that price. Nonfat dry milk was unchanged at $.99 per pound.  No sales were recorded.

Grain markets watched the wheat complex fall 11 cents in Chicago, 10 in Kansas City and 6 in Minneapolis. Corn declined a half cent while beans added a half cent. Fat cattle dropped $1 per cwt while feeders weakened $3 per cwt. 

Milk Futures Continue Downward in Chicago Thursday

On the Chicago Mercantile Exchange milk futures were mostly down, and cash dairy prices were mixed Thursday.   July Class III milk was up $.10 at $24.42.  August was down $.26 at $22.50. September was down $.07 at $20.86  October was down $.13 at $19.12  The milk futures from November through next June ranged from five cents higher to nineteen cents lower.  

In commodity prices Dry whey was unchanged at $.34 cents per pound.  No sales were recorded. Forty-pound blocks were down $.0375 at $2.5850 per pound. There were two sales at $2.5850 and $2.5875. Barrels were unchanged at $2.45 per pound.  Two sales were recorded at that price. Grade AA Butter was up $.0400 at $1.7075 per pound.  Four sales were recorded from $1.6675 to $1.70. Nonfat dry milk was down $.0050  at $.9925 per pound.  Seven sales were recorded from $.99 to $1.00.

Assists with 7.8 Million Pounds of Dairy Product Export Sales

Cooperatives Working Together (CWT) member cooperatives accepted fifteen offers of export assistance from CWT that helped them capture sales contracts for 557,770 pounds (253 metric tons) of Cheddar and Monterey Jack cheese, and 7.3 million pounds (3,300 metric tons) of whole milk powder.The product is going to customers in Asia, Central and South America, and will be delivered from July through November 2020.

CWT-assisted member cooperative export sales contracts for 2020 total 21.246 million pounds of American-type cheeses, 6.246 million pounds of butter (82% milkfat), 1.960 million pounds of anhydrous milkfat, 3.784 million pounds of cream cheese and 26.387 million pounds of whole milk powder. The product is going to 28 countries in seven regions. These sales are the equivalent of 612 million pounds of milk on a milkfat basis.

Assisting CWT members in moving dairy products overseas through the Export Assistance program is critical during the challenging times U.S. dairy farmers and cooperatives are facing. The Export Assistance program helps in strengthening and maintaining the value of dairy products that directly impact producers’ milk price. The program is helping member cooperatives grow and maintain world market share for U.S dairy products and is a significant factor in maintaining the total demand for U.S. dairy products and the demand for U.S. farm milk.

Dairy product and related milk volume amounts reflect current contracts for delivery, not completed export volumes. CWT pays export assistance to bidders only when export and delivery of the product is verified by required documentation.

All dairy farmers and dairy cooperatives should invest in CWT. Membership information is available on theCWT website.

Milk Futures Fall Sharply in Chicago Wednesday

Class III milk futures fell sharply as spot cheese was slightly lower on the Chicago Mercantile Exchange Wednesday. July Class III milk was unchanged at $24.32 and August was down $.54 at $22.76, while September was down $.43 at $20.93 and October was down $.20 at $19.25. The milk futures from November through next June ranged from unchanged to twelve cents lower. Class IV milk also saw red today.  July remains at $13.80/cwt.  August descended 17 cents to $13.78.  September dropped 13 to $14.32.  

In the CME Cash Product Trade,  Dry whey was down $.0050 at $.34 cents per pound. One sale was recorded at that price. Forty-pound blocks of cheese were down $.0375 at $2.6225 per pound. There were four sales recorded from $2.62 to $2.63. Barrels were down $.0150 at $2.45 per pound. Eight sales were recorded from $2.44 to $2.46. Grade AA Butter was up $.0050 at $1.6675 per pound. No sales were recorded. Nonfat dry milk was up $.0050 at $.9975 per pound. Two sales were recorded at $.9975 and $1.00.

December corn gained 4 cents to $3.3475/bushel.  November soybeans improved 2.75 cents to $8.9550/bushel.  August soybean meal gained $1.00 to $286.60/ton.  September Chicago wheat added 6.75 cents to $5.3475/bushel.  Fats and feeders were mixed.  August live cattle lost 35 cents to $101.50/cwt.  August feeders gained 20 cents to $141.52/cwt.  September crude oil fell 8 cents to $41.84. 

Milk Futures Higher in Chicago Tuesday

Class III milk continues to march higher on the Chicago Mercantile Exchange Tuesday. Class III milk was unchanged in July at $24.32, but August gained 15 to $23.30, and September gained 63 to $21.36 per cwt. Class IV was unchanged in July at $13.80, August gained 5 to $13.95, and September gained 6 cents to 14.45/cwt.

The CME spot trade was similarly mixed.   Dry whey was up $.01 at $.3450 cents per pound.  No sales were recorded. Forty-pound blocks were down $.0025 at $2.66 per pound. There were five sales recorded from $2.66 to $2.67. Barrels were up $.0150 at $2.4650 per pound.  Six sales were recorded from $2.45 to $2.4650. Grade AA Butter was down $.0175 at $1.6625 per pound.  No sales were recorded. Nonfat dry milk was up $.0025 at $.9925 per pound.  Two sales were recorded at $.99.

Class III Milk Sharply Higher in Chicago to Start the Week.

Class III milk prices roared back higher after some softness early in Monday’s session on the Chicago Mercantile Exchange. July Class III milk was up $.06 at $24.32 and August was up $.76 at $23.24, while September was up $.75 at $20.73 and October was up $.75 at $19.09 The milk futures from November through next June ranged from zero to sixty-four cents higher. Class IV markets ended the day mixed. 

Product values ended with fairly modest changes. Dry whey was unchanged at $.3350 cents per pound. No sales were recorded. Forty-pound cash cheese blocks were up $.0025 at $2.6625 per pound. There were three sales recorded from $2.66 to $2.6625. Barrels were up $.02 at $2.45 per pound. Four sales were recorded from $2.43 to $2.45. Grade AA Butter was down a penny at $1.68 per pound. Eleven sales were recorded from $1.6750 to $1.71. Nonfat dry milk was down $.01 at $.99 per pound. One sale was recorded at that price.

In other markets wheat weakened 12 cents in Chicago and 13 in Kansas City, respectively. Minneapolis declined 6. Wheat put pressure on corn as corn lost 4 cents in December and moved to $3.35 ¾. Cattle dropped $1 in both the fats and feeder markets while hogs doubled that, falling $2 per cwt.   

Fonterra revises its 2019/20 and 2020/21 forecast Farmgate Milk Price ranges

While there is still a high level of uncertainty in our global markets, we do see a lowering level of risk and this supports a decision to lift the bottom end of the price range.

Fonterra Co-operative Group Limited today revised both its 2019/20 and 2020/21 forecast Farmgate Milk Price ranges.

The 2019/20 forecast Farmgate Milk Price range has narrowed from $7.10 – $7.30 per kgMS to $7.10 – $7.20 per kgMS.

The mid-point, off which farmers are paid, has reduced to $7.15 per kgMS, down from $7.20 per kgMS

The 2020/21 forecast Farmgate Milk Price range has narrowed from $5.40 – $6.90 per kgMS to $5.90 – $6.90 per kgMS. The mid-point, off which farmers are paid, has increased to $6.40 per kgMS, up from $6.15 per kgMS

Fonterra Chairman John Monaghan says the narrowing of the 2019/20 milk price toward the lower end of the previous range is the result of a strengthening New Zealand dollar versus the US dollar over the past two months.

The Co-operative will announce the final 2019/20 Farmgate Milk Price as part of its Annual Result in September.

Commenting on the 2020/21 forecast Farmgate Milk Price range, Mr Monaghan says the lift to the bottom end of the range was being predominantly driven by improved market conditions in China.

“After an initial shock due to Covid-19, dairy consumption in China is recovering with more people spending on food. We’re seeing customers ramp up promotional activity as they look to catch up on the sales losses incurred over lockdown.

“Elsewhere, the EU and US Governments’ support measures for farmers are holding up milk production and dairy commodity prices despite the disruption they have experienced so far from COVID-19. While we expect these support measures to end at some point, it is likely they will continue through the peak of the New Zealand season.

“While there is still a high level of uncertainty in our global markets, we do see a lowering level of risk and this supports a decision to lift the bottom end of the price range.

“It’s very early in the new season and we are keeping a close eye on consumer demand and production from the key milk producing regions. Milk supply from the EU, US and Latin America is increasing despite the impact of Covid-19, and there continues to be uncertainty around how the global recession and the potential for a second wave of Covid-19 globally could impact demand.”

The Co-operative is advising its farmers to continue budgeting with caution.

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Source NZ Food Manufacturer

Milk Markets Move Higher After Mid-Week Correction

On the Chicago Mercantile Exchange, milk futures were mixed, mostly higher as markets work to find a new trading range. Thursday brings a move back higher in Class III milk after the mid-week correction on Wednesday.  Class III started the day down significantly after the limit moves Wednesday, but bounced back strongly. July fell 8 cents to 24.23, but August surged 35 higher to 22.69, and September was up 55 to 20.03. The balance of 2020 was 22-47 higher. Class IV couldn’t follow suit. July fell 17 to 13.82, Aug fell 19 to 14.23, and September fell 6 to 14.62. 

Though Cheddar blocks still fell 9 cents in the CME spot trade, we found 2 buyers willing to spend $2.71 on blocks.  Barrels down $0.0025 at $2.4175.  Butter down $0.0025 at $1.69.  One trade was made at $1.6675. Nonfat dry milk down $0.01 at $1.00.  Ten trades were made ranging from $1.00 to $1.01.  Dry whey up $0.0125 at $0.3325. 

Grains saw a bounce higher as well on Chinese buying. December corn gained 3 ½ to 3.37 ½, November Soybeans gained 8 ¼ to 8.91 even, and Soybean meal moved $1.20 higher to 287/ton. 

Milk Futures Tumble in Chicago Wednesday

On the Chicago Mercantile Exchange milk future tumbled Wednesday as cash cheese fell from its record high along with most other cash markets. Class III milk futures reacted negatively today as cheddar blocks were down lower.  July remained even at $24.34/cwt.  August milk dropped 44 cents lower to $22.96/cwt.  September milk declined 62 cents to $20.09/cwt.  Quarter 4 2020 descended 27-45 cents for an average of $17.43/cwt. Class IV milk futures settled even to higher today.  July milk remains at $14.03/cwt.  August gained 16 cents to $14.51/cwt.  The second half of 2020 is averaging $14.86.  

In the CME Cash Dairy Product Trade, dry whey unchanged at $0.32.  Blocks down $0.19 at $2.80.  Barrels unchanged at $2.42.  Five trades were made at that price. Butter down $0.0525 at $1.6925.  Three trades were made ranging from $1.6925 to $1.72. Nonfat dry milk down $0.0050 at $1.01.  Five trades were made at $1.01 and $1.0125. 

The grain complex ended up mixed today.  December corn fell 2.75 cents to $3.3375/bushel.  November soybeans added 2.25 cents to $8.7750/bushel.  July soybean meal climbed 60 cents to $283.70/ton.  September Chicago Wheat improved 2 cents to $5.2675/bushel.  

Cheddar Block Market the Greenest Pasture in the Commodity World

The T.C. Jacoby Weekly Market Report Week Ending July 10, 2020

In an environment as fickle as the Chicago Mercantile Exchange, bulls are not typically bred for their stamina. But in the Cheddar block market there is a bull of a different breed.

In an environment as fickle as the Chicago Mercantile Exchange, bulls are not typically bred for their stamina. They tend to charge and then pause to catch their breath before attempting another run, and they are not ashamed to retreat to the shade from time to time. But in the Cheddar block market – currently the greenest pasture in the commodity world – there is a bull of a different breed. He is relentless, charging straight uphill with no signs of fatigue. This week the block market leapt from one record to the next, finally resting at an alltime high of $2.915 per pound, up 24ȼ from last week’s already lofty value. The barrels were less energetic. They fell 7.5ȼ this week to a still-lofty $2.34.

Near-term demand for blocks remains formidable. USDA’s Dairy Market News reports, “With government buying programs in place, along with steadfast retail demand during grilling season, [Midwestern] buyers are still active and willing to pay prices very few contacts would have expected when markets were near $1 in April.” However, in the Northeast and the West, some cheese buyers question the staying power of such unprecedented prices. Grocers and the food box program are moving a lot of cheese, but orders are starting to slow from restaurants, hotels, and caterers, especially in areas where coronavirus counts are climbing. Meanwhile, cheesemakers are running hard. Despite the heat, there is plenty of milk in the Upper Midwest, and cheesemakers are able to secure spot loads at a discount.

Butter production has slowed as cream heads to other uses, particularly ice cream. Butter demand continues to suffer from the pronounced slowdown in the restaurant and foodservice industry. This week, CME spot butter fell 4.75ȼ to $1.69.

The milk powder market perked up a bit. CME spot nonfat dry milk (NDM) advanced 0.75ȼ to $1.0175. Milk powders made big strides at the Global Dairy Trade (GDT) auction on Tuesday, boosting the GDT index to its largest gain since November 2016, up 8.3% from the previous event. Skim milk powder rallied 3.5% to the equivalent of NDM at $1.30 per pound, after adjusting for protein. Whole milk powder vaulted 14%. Global demand for milk powder has proven surprisingly strong despite the woes of the pandemic, and higher SMP prices are making U.S. milk powder increasingly competitive. On the domestic front, NDM is moving out of warehouses and into cheese vats.

CME spot whey slipped 4.25ȼ this week to 28.75ȼ, the lowest value since last November. Robust cheese production is generating a steady stream of whey, and manufacturers’ are largely eschewing value-added whey products, so whey powder is piling up. With gyms around the country sitting empty, sales of highprotein whey products have slowed. Those who exercise regularly may find ways to incorporate dairy protein into their at-home regimens, but they likely won’t try new products or make an impulse purchase until they’re back in the gym. Dry whey has gotten plentiful and cheap enough to attract a bit more foreign business, but stocks continue to grow. Whey is likely to remain a drag on Class III values.

Class III futures followed Cheddar blocks higher. The July contract rallied $1.23 to $24.20, within shouting distance of the alltime high of $24.40, set in October 2014. August Class III soared $2.09 to $23.04. Over the past month, the August contract has added more than $6 per cwt., a staggering increase. Deferred Class III futures posted double-digit gains. Class IV futures settled in the red, with 30ȼ to 40ȼ losses on the front of the board. Sky-high Class III values are likely encouraging dairy producers to add as much milk as they can, but the heat may stymie their efforts.

The grain markets rallied early in the week, as a hot, dry forecast raised concerns about yields. The markets got a mid-week boost after USDA reported a sizable sale of U.S. corn to China, and China’s ag ministry projected continued imports. For years, China has relied on its massive corn reserves and done its best to keep out foreign grain. Now the Chinese reserve is dwindling, and China’s rapidly modernizing hog industry requires more feed than its backyard herd did in the past.

USDA published its monthly update to crop balance sheets today, but they held no surprises. The market shrugged and turned its attention to the forecast. Better-than-expected rains dampened the bulls’ earlier enthusiasm. The corn crop will still have to pollinate in the middle of a heat wave, and there are plenty of dry spots. But there is an abundance of grain in the world, and supplies will be ample even if this year’s corn crop falls a little short of its full potential. September corn settled at $3.3625 per bushel, down 7.25ȼ from last Thursday. August soybeans closed at $8.87, down 4.25ȼ.

Original post at https://www.jacoby.com/market-report/cheddar-block-market-the-greenest-pasture-in-the-commodity-world

Cheese Blocks Bring Milk Futures Down in Chicago Tuesday

On the Chicago Mercantile Exchange milk futures fell Tuesday as traders correct overbought positions and block cheese finally sees negative movement.  Class III milk futures reacted negatively today as cheddar blocks were down lower.  July Class III milk unchanged at $24.34.  August down 31 cents at $23.09.  September 48 cents lower at $20.23.  October 36 cents lower at $18.40.  November through January contracts 17 to 19 cents lower. Class IV milk futures settled even to higher today.  July milk remains at $14.03/cwt.  August gained 16 cents to $14.51/cwt.  The second half of 2020 is averaging $14.86.  

In the CME Cash Dairy Product Trade, blocks fell 1 penny to $2.99/lb.  Dry whey up $0.0025 at $0.32.  Barrels up $0.0175 at $2.42.  Butter up $0.0175 at $1.7450.  Five trades were made at $1.7450 to $1.75. Nonfat dry milk unchanged at $1.0150.  Two trades were made at $1.0125 and $1.0150. 

The grain complex ended up mixed today.  December corn fell 2.75 cents to $3.3375/bushel.  November soybeans added 2.25 cents to $8.7750/bushel.  July soybean meal climbed 60 cents to $283.70/ton.  September Chicago Wheat improved 2 cents to $5.2675/bushel.  

Milk Markets Start Week Higher in Chicago

On the Chicago Mercantile Exchange Milk futures continued to press higher Monday as the block and barrel cheddar spread again widened to a new record and block cheddar broke another daily record. Milk prices strengthened ad much as 70 cents throughout the day in Class III but ended up around 20-30 in 2020. 2021 prices gained 10 cents as well. Class IV prices were mainly unchanged. July Class III milk 14 cents higher at $24.34.  August up 36 cents at $23.40.  September 43 cents higher at $20.71.  October 25 cents higher at $18.76.  November through January contracts eight to 21 cents higher.

Dry whey jumped 3 cents to 31 ¾ which still remains among the lower end of their range. Blocks up $0.0850 at $3.00, a new record.  Seven trades were made ranging from $2.9175 to $3.00.  Barrels up $0.0625 at $2.4025.  Butter up $0.0325 at $1.7275.  Eleven trades were made ranging from $1.72 to $1.7275. Nonfat dry milk unchanged at $1.0150. 

Grain markets struggled to begin the week, losing 8 cents in corn, 15 in soybeans and 3-11 in the wheat complex. 

Milk Prices Test Historic Highs Following Pandemic Pressure

Jersey cows have their morning ration at the Ballard Dairy in Gooding, Idaho. Cheddar cheese prices are at a record high, but analysts worry that they could drop. Carol Ryan Dumas/Capital Press File

Milk futures traded near $20 per cwt in early January, but the COVID-19 pandemic had a significant effect on milk prices as the demand shift for dairy products left many producers with no processing home through much of April.

Changes in the livestock markets were much reported through March and April, including backed up production and processing. However, the dairy industry has an even more limited shelf life, eliminating the ability to back up production and processing.

Class III milk futures have rallied 208% from pandemic lows. Cheese prices have surged, tightening milk supplies due to COVID-19 disruptions the dairy industry. (DTN ProphetX chart by Rick Kment)

For dairy producers, the inability to sell milk to processors meant one of two things: either «dry up» cows, thereby prematurely ending the production cycle and waiting until the next cycle before that animal will produce milk again; or keep milking these cows and dump the milk. We saw many reports of millions of gallons of milk dumped on fields and plowed into the soil as fertilizer. This pandemic came at the worst time of year in the dairy production cycle. The spring «flush» is considered peak production time and limiting milk output near this peak will significantly affect overall milk production through the rest of the year.

The significant shift in market prices is being driven by differing factors, which makes this move even more volatile and could continue to leave markets plagued with rapid shifts through most of the year. Tighter milk supplies and growing demand for dairy products through the end of last year left prices moving higher into the holiday season of 2019. However, the abrupt change in buyer demand habits during March and April 2020 — due to the coronavirus shutting down the economy — sparked significant disruptions in the way milk and dairy products were processed. For example, the majority of fluid milk demand has traditionally been from the food service industry. This includes school lunch programs, colleges, cafeterias, restaurants and catering venues. A large segment of the processing industry is setup to process and package milk in either small single serving containers (school lunches) or large commercial dispensers. The abrupt and immediate change in the food service industry in March left these production lines dark, with the infrastructure not able to effectively transition to producing milk for retail suppliers (think gallon bottles).

Once the shock to the system set in — and markets tumbled to $11.23 per cwt during the month of April — renewed demand for retail dairy products, such as cheese, butter and other processed dairy products surged as consumers flooded grocery stores and cleared shelves of many products. As a result, barrel cheese prices surged from an April low of $1 per pound to current levels of $2.37 per pound. These cheese price levels are the highest seen since 2014 and near historic levels.

Class III milk futures are currently trading at $23.40 per cwt, which is a 208% rally from April lows, with the expectation that increased demand support through the summer months will continue to drive strong buying in most dairy products, including fluid milk, ice cream, cheese and butter products. Even though the food service industry is still struggling to regain market share due to social distancing and limited consumer demand, schools planning to reopen and return to a semi-normal routine through the fall and winter is expected to keep demand for dairy products strong through the end of the year.

Given current milk and cheese price levels, it is likely the majority of gains have already been priced into the complex, but the effect of the coronavirus on the dairy industry is likely to disrupt the normal milk production cycle for months, if not years.

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All information contained in these pages that is NOT the property of eDairy News and is NOT considered “in the public domain” by legal regulations, are trademarks of their respective owners and recognized by our company as such. The publication on the eDairy News website is made for the purpose of gathering information, respecting the norms contained in the Berne Convention for the Protection of Literary and Artistic Works; in Law 11.723 and other applicable norms.

Any claim arising from the information contained on the eDairy News website will be submitted to the jurisdiction of the Ordinary Courts of the First Judicial District of the Province of Córdoba, Argentine Republic, with a seat in the City of Córdoba, to the exclusion of any another jurisdiction, including the Federal.

Source: dtnpf.com

Cheese Blocks Set New Record and Milk Futures Push Higher in Chicago Thursday

On the Chicago Mercantile Exchange, milk futures closed higher Thursday ahead of Friday’s supply and demand report and as cash cheese prices continue to push higher. Class III milk futures popped higher today.  July launched a 51-cent gain to $24.18/cwt.  August and September milk had limit moves today, to $22.28/cwt and $19.82/cwt.  October milk gained 44 cents to $18.37/cwt.  Quarter 4 2020 is now averaging $17.41. Class IV milk futures were softer today.  September lost 4 cents to $14.99/cwt.  October milk suffered a 19-cent loss to $15.22/cwt.

The block cheese market set another record price today, surging 9.25 cents higher to $2.83/lb. on 5 trades.  Barrels unchanged at $2.40.  Butter unchanged at $1.6875.  Three trades were made ranging from $1.6875 to $1.71. Nonfat dry milk unchanged at $1.0325.  Dry whey unchanged at $0.2875. 

The grain complex put together some solid gains today.  December corn added 2.75 cents to $3.57/bushel.  November soybeans gained 4.25 cents to $9.0150/bushel.  July soybean meal increased 3.50 cents to $295.10/ton.  September Chicago Wheat ascended 8.50 cents to $5.25/bushel.  August fats improved 10 cents to $99.25/cwt.  August feeders finished 47 cents higher to $134.52/cwt.  August crude oil declined $1.39 to $39.51.  

 

Mixed Markets in Chicago Wednesday

On the Chicago Mercantile Exchange, milk futures closed mixed Wednesday with markets trading in a narrow range, cash markets also saw limited activity. July milk climbed 31 cents to $23.75/cwt.  August was up 2 to $21.52.  September milk declined 10 cents to $19.03/cwt.  The quarter 3 average sits at $21.43/cwt.  Quarter 4 2020 average settled at $17.15/cwt.   Class IV milk futures were once again thinly traded, with only September moving 16 cents lower to $15.03/cwt.  Second half average settled at $15.13/cwt.

Blocks and barrel cheese continue its move higher today.   Blocks up $0.0275 at $2.7375.  Five trades were made at $2.7350 and $2.7375. Barrels up $0.03 at $2.40.  Dry whey unchanged at $0.2875.  Butter down $0.05 at $1.6875.  Three trades were made ranging from $1.6875 to $1.71. Nonfat dry milk unchanged at $1.0325. 

December corn added 1.75 cents to $3.5425/bushel.  November soybeans declined 5.25 cents to $8.9725.  July soybean meal fell $1.70 to $291.60/ton.  September Chicago Wheat had an impressive day, jumping 21.25 cents to $5.1650/bushel.  Fats and feeders both trended lower today.  August live cattle fell 85 cents to $99.15/cwt.  August feeders dropped 87 cents to $134.05/cwt. 

Global Dairy Trade Sees Largest Gains Since Beginning of Year

The Global Dairy Trade auction index in New Zealand posted its largest gain since the beginning of the year again this week. Event 263 started our day with an 8.3% move higher than 3 weeks prior to $3,179 per ton. All the products traded higher except anhydrous milk fat that was 2/10 of a percent lower. Demand for whole milk powder carried the trade, up 14 percent.  Butter was up 3%, Cheddar was up 3.3%, lactose traded 1.9% higher, skim milk powder was up 3.5%. 

Milk Futures Mixed Tuesday in Chicago

On the Chicago Mercantile Exchange, milk futures closed mixed Tuesday as traders work to find a new trading range amid strong cheese prices and growing global demand. Class III milk was mixed during trading. Starting the day higher and seeing a sell-off prior to the 11 a.m. cheese trade and price faded as our day progressed. July finished up 19 to $23.44, August fell 14 to $21.50, and September fell 2 to $19.13/cwt. Class IV milk saw gains nearby. July up 1 to $14.27, August gained 3 to $14.95, and Sept gained 9 to $15.19 /cwt. 

The CME spot market saw Dry whey down $0.0250 at $0.2875.  Eight sales were made ranging from $0.2850 to $0.30. Blocks up $0.01 at $2.71.  Two trades were made at $2.7075 and $2.71. Barrels unchanged at $2.37.  Butter down $0.0075 at $1.7375.  Four trades were made ranging from $1.7350 to $1.7525. Nonfat dry milk up $0.02 at $1.0325.  Twenty-four trades were made ranging from $1.0150 to $1.0325. 

Grain markets saw selling pressure as well Tuesday. Corn fell 1 ½ to $3.45 even, soybeans fell 3 ¼ to $8.95 ¼, and soybean meal slid $2.10 lower to $293.30/ton.

Class III Starts the Week Higher in Chicago

A mixed cheese trade couldn’t slow Class III milk’s big move higher to kick off the week. Milk futures on the Chicago Mercantile Exchange closed higher Monday as strong block cheese demand continues to drive markets. Class III milk futures strengthened 28 cents in July to $23.25 per cwt. August led the pack jumping 65 cents to $21.60. September through December gained 13-27 cents per cwt. 2021 prices gained 13-27 cents per cwt. 2021 prices gained modestly as well. Class IV prices traded 18 higher in August and 11 stronger in September. 

Dry whey down $0.0175 at $0.3125.  Blocks up $0.0250 at $2.70.  Five trades were made ranging from $2.6950 to $2.70.  Barrels down $0.0450 at $2.37.  Two trades were made at $2.37 and $2.39. Butter up $0.0075 at $1.7450.  Nonfat dry milk up $0.0025 at $1.0125. 

Over in the grain complex, futures added value following last Thursday’s selloff. Corn closed at $3.56 ¼, up 2 ¾. Soybeans ran 9.5 higher for new crop and ended at $9.06 ¼. Wheat added 1-4 cents. Live and feeder cattle both added around $1 per cwt on Monday. 

Cheese and Butter Prices Skyrocket. Is it Realistic? Maybe not!

Wholesale prices for cheese and butter have been extremely volatile.  Both the Chicago Mercantile Exchange (CME) and the National Agricultural Statistical Service (NASS) numbers have been volatile although sometimes in opposite directions with wide differences. The NASS price is used for milk pricing.  The first section of this post will cover the volatility of cheese and butter prices as reported by NASS.  NASS conducts weekly surveys from 89 entities and publishes them on Wednesday of the next week.  These are used to set Federal Order milk prices.  The price of Cheddar is used to represent the cheese price in the Federal Order pricing.  This post will cover cheese and butter as they are key elements of Federal Order milk payments.

NASS cheese and butter pricing is shown below (Chart I and II).  They follow the same pattern.  In April, prices fell drastically.  Cheese prices dropped by ⅓ in a matter of a few weeks.  Butter prices had already started dropping but took another ⅓ drop as well.  Cold storage inventories of butter and cheese were growing rapidly in April as food service usage was drastically reduced due to mandated restaurant closures. High inventories bring lower prices.

On May 8, the Coronavirus Food Assistance Program (CFAP) was published.  By that time plans were in place to reopen the U.S. for business.  The impact was immediate.  Nothing had really changed at that time, but the speculation of recovery set-off significant price increases.  Cheese prices shot up by 90 percent to $2.13 per pound and butter shot up by 64 percent to $1.83 per pound.

Typically cheese and butter inventories levels in cold storage have the greatest influence on wholesale prices.  In this case, the increases appear to be fueled by an expectation of economic recovery and government stimulus.

Chart I – NASS Weekly Cheese Prices for 2020
Chart II – NASS Weekly Butter Prices for 2020

There have been press articles stating that cheese production is being ramped up to make cheese available for Coronavirus Food Assistance Program (CFAP).  If this were the case, it would defeat one of the intents of the program which is to lower the bloated inventories and bring them back to normal levels and restore normal prices.

It has also been reported in the press that some cheese inventories are in tight supply.  If that is true, it must be for just specific categories of cheese in specific locations.  Expanded pizza sales during the quarantine period have undoubtedly put pressure on Mozzarella cheese inventories and may have caused tight inventories is some locations.

Chart III is for orientation purposes.  The two cheeses, Cheddar and Mozzarella, make up 63 percent of total cheese production.  Cheddar is especially important because it is used as the “cheese” price for Federal Order milk payment and Cheddar is also the quoted price for cheese on the CME.  As seen in Chart I below, Cheddar makes up just 29 percent of total cheese production, but it is used as a barometer for all cheese prices.

Chart III – Cheese Production by Cheese Type
In the prior post, the end of April inventory levels for cheese and butter in cold storage were reviewed.  Additional data impacting the April inventories was recently released which sheds more light on the moving target of the COVID-19 impact.  The data for April now includes production, imports, exports, and disappearance. The term “disappearance” represents withdrawals from cold storage.

Production of the two largest categories of cheese, Cheddar and Mozzarella, are publicly available and will be covered specifically.  Inventory and disappearance levels for Cheddar and Mozzarella are not public but they do make-up the majority of cheese classified as American or “Other”.  Cheddar makes up 72 percent of American cheese production, and Mozzarella makes up 57 percent of the “Other” cheese production.  In the following analysis, the inventory and disappearance of American cheese and “Other” cheese are used to represent inventory and disappearance of the two top cheeses, Cheddar and Mozzarella.

This post was delayed for one day as new cold storage data for the end of May became available.  Charts VI, IX, and XII have been updated to show the impact of May end cold storage inventories.  No May data is yet available for production, imports, exports, or disappearance.  The new cold storage data does not show significant inventory reductions that justify the NASS high cheese and butter prices.  Butter inventories increased further in May from April and cheese inventories decreased only slightly.

The analysis will be presented in three parts.   Cheddar will be first because it is the most important, then Mozzarella, and then butter.
CHEDDAR CHEESE

Production of Cheddar has not slowed down (Chart IV).  If anything, it is up.  Cheddar is not a growth product.  However, in April 2020, Cheddar production reached a high just slightly below the record high that occurred in December 2019.

Chart IV – Production of American Cheese

Disappearance of Cheddar is represented in Chart V by the disappearance of American cheese from cold storage.  Disappearance for the month of April 2020 was extremely low, down 9 percent from the average for the last three years for the month of April.  With the significant reduction in food service, this is not surprising.

Chart V – Disappearance of American Cheese

Chart VI shows the impact of “high normal” production and low disappearance.  April inventories of American cheese were up six percent to a record high 836 million pounds.  This led to the huge fall in NASS pricing covered in Chart I.  May cold storage inventories decreased by only two percent.

Chart VI – Inventory of American Cheese

MOZZARELLA

April production of Mozzarella (Chart VII) was slightly down compared to the prior three years of April production.  Mozzarella is a growth product with heavy use in pizza and Italian food.  Mozzarella is held in cold storage for a much shorter time than Cheddar. The reduction in overall food service may have made this lower production necessary.

Chart VII – Production of Mozzarella Cheese

Disappearance of “Other” cheeses, primarily Mozzarella, was down nine percent from the prior three years of April (Chart VIII).  Considering that Mozzarella is a growth product and the drop in disappearance is an unusual occurrence but it does follow the drop in production.

Chart VIII – Disappearance of “Other” Cheese
The inventory of “Other” cheese was at an April record high level of 647 million pounds.  Disappearance was down much further than production decreases resulting in a significant increase of 16 percent in inventory (Chart IX).  May cold storage inventories decreased by only two percent.

Chart IX – Cold Storage Inventors of “Other” Cheese
BUTTER

Production of butter took a huge jump in April to a record high of 216 million pounds churned (Chart X).

Chart X – Production of Butter

Butter disappearance (Chart XI) was down from the prior month, but up significantly for the month of April 2020 compared to April in the prior three years.  April butter disappearance increased 10 percent from April in the prior three years.

Chart XI – Disappearance of Butter

The record churning of butter exceeded disappearance leaving a record high April butter inventory as shown in Chart XII.  The butter disappearance was better than the prior three years of April, but the rise in churning was exceptionally high and very significant.  May cold storage inventories showed a further increase of three percent in butter inventory.

Chart XII – Inventory of Cold Storage Butter

SUMMARY

The price swings in cheese and butter are record setting and counter to the April data on production, disappearance, and inventories.

 
Source: MilkPrice

Global Dairy Commodity Update July 2020

Wholesale dairy markets rebounded strongly from the impacts of COVID-19 with worldwide closure of foodservice outlets – most importantly in the US and Europe – and the cessation of cross-border travel.

Trade was slower than the 2019 comparative for the first 4 months of 2020, impacted by some logistical difficulties due to COVID-19, but also against strong 2019 numbers for milk powders when prices were much lower. There are some timing factors that affected that – the peak of WMP trade was pushed earlier with the Chinese New Year timing this year, while the early 2019 run-out sale of SMP in the EU continued into March – meaning comparatives were strong.

The sustained strong retail sales, refilling foodservice outlets, government aid spending in the US and slower milk supply effects have hauled cheese and butter prices off the floor.

This feels like a false dawn. A deep recession is unfolding due to the huge losses in income due to business closures which will erode household spending in western markets and weaken developing world economies.

As the reality of recession takes hold, food spending in western economies will be impacted, reducing discretionary outlays, reducing the propensity to dine out and causing frugal spending in the grocery store.

The effect on ongoing cheese demand will be the most important driver of the impact on dairy markets, as the processor response to weaker demand will push more milk to powder driers in coming months. In the outlook, cheese EU and US demand remains flat in H2-2020 before improving in 2021.

The impact on cream demand without food service consumption will push up butter production and stocks. Demand from export markets, also with weak food service sectors for the rest of the year, will not help, despite prices being more attractive.

The milk supply response will be all important in this outlook with likely different trends across major producers.

Skim Milk Powder

SMP and NFDM prices continued steady, recovering after the worst of the COVID-19 shocks, as cheese and butterfat markets also stabilised.

Whole Milk Powder

Spot values remained mixed through June; NZ values improved, while EU product was steady. However, EU product continues to trade at a premium. WMP trade shrank (with exports to China 16% lower) further in May, with export declines posted by NZ and Uruguay.

Cheese

Global cheese markets are likely to be impacted through 2020 by the disruption to food service sales, but not all of the impact will be negative. Attention is focused on the impacts on demand in major EU and US markets, affecting export prices, but also SMP/butter output.

Butter

Global butterfat prices have converged with improving EU wholesale prices, while Oceania markets have weakened with demand reflecting the slow reopening of food service channels in major markets and the damage to consumer spending as recession bites.
While grocery and other food retail demand remains buoyant, there is no prospect that this can make up for the loss of butterfat sales into food service outlets.

Whey

Whey product prices have inevitably been caught in the complex impacts of COVID-19 due to changes in cheese production, relative protein values and the demand for certain applications.

Source Maxum Foods

Holiday optimism drives markets higher in Chicago Thursday

On the Chicago Mercantile Exchange milk futures closed higher Thursday on holiday optimism and strong cheese demand. Class III milk futures ended the week on a higher note.  July milk added 12 cents to $22.97/cwt.  August milk rocketed 54 cents higher to $20.95.  September increased 45 cents to $18.81/cwt.  Second half 2020 average is $18.99/cwt.  Class IV futures were relatively unchanged.

In the CME Cash Dairy Product Trade,  dry whey unchanged at $0.33.    Blocks up $0.0350 at $2.6750.  Six trades were made ranging from $2.66 to $2.68.  Barrels up $0.0150 at $2.4150.  Four trades were made at $2.41 and $2.4150. Butter down $0.0125 at $1.7375.  Nonfat dry milk up $0.0050 at $1.01.  Markets will be closed on July 3rd for the holiday.

The grain complex receded today.  December corn tumbled 7.50 cents to $3.53/bushel.  November soybeans fell 1.75 cents to $8.9725/bushel.  September Chicago W=wheat decreased 6.75 cents to $4.92/bushel.  August live cattle rallied $2.75 to $100.05/cwt.  August feeders climbed $2.82 to $135.90/cwt.  August crude oil launched a 51-cent gain to $40.33.  

Milk Futures See Major Gains in Chicago Wednesday

On the Chicago Mercantile Exchange milk futures saw major gains Wednesday ahead of the monthly dairy products report while most cash trade was dimmed by the holiday-shortened week.  Class III moved higher – June announced price is 21.04, July gained 66 to 20.41 and Aug gained 45 to 18.36. Class IV announced June price is $12.90, July gained 1 to 14.74, and Aug gained 11 to 15.09.

The CME spot trade saw Dry whey up $0.0125 at $0.33.   Seven trades were made ranging from $0.31 to $0.3175. Blocks unchanged at $2.64.  Barrels unchanged at $2.40. Butter down $0.0150 at $1.75.  Four trades were made at $1.7475 and $1.75. Nonfat dry milk unchanged at $1.0050. 

The grain complex continued moving higher. Corn begins July trading 9 ¾ higher to 3.48 ¼, Soybeans followed suit, gaining 9 ½ to 8.93 ¾, and November soybeans finished the day at 8.99 even but traded over $9 for the first time since March. Soybean meal moved $6.40 higher to 292.70.

Futures Up Cash Dairy Steady in Chicago Tuesday

On the Chicago Mercantile Exchange Tuesday milk futures were up, and cash dairy prices were steady to up.   Class III milk prices rose double digits in 2nd half 2020. August milk led the charge jumping 60 cents to $19.80 per cwt.  June Class III milk was up $.03 at $20.97.  July was up $.15 at $22.35. August was up $.55 at $19.75.  September was up $.41 at $17.91.  The milk futures from October through next May ranged from two to thirty-two cents higher.   First, half 2021 added double digits as well. Class IV markets were mixed following butter’s unchanged session and nonfat’s slight fall. 

Tuesday’s commodity markets were highlighted by a stronger dairy and grain complex.  Dry whey was unchanged at $.3175 cents per pound.  Five sales were recorded from $.3175 to $.32. Forty-pound blocks were up $.02 at $2.64 per pound. There were five sales recorded from $2.62 to $2.67. Barrels were unchanged at $2.40 per pound.  No sales were recorded. Grade AA Butter was unchanged at $1.7650 per pound.  No sales were recorded. Nonfat dry milk was down $.0075 at $1.0050 per pound.  Six sales were recorded from $1.0050 to $1.01.

Over in the grain complex the USDA released its Planted Acreage and Quarterly Stocks reports. The surprise came in the corn acres data. While the trade was looking for an average of 95 million acres, USDA printed 92 million acres spurring the corn market 12-15 cents higher. December corn traded through $3.50 per bu. for the first time since April 14. Soybean acreage was more in line with expectations as 83 million acres were released. Soybeans rallied 17-20 cents per bu. Tuesday. 

Milk Futures Start Week Strong in Chicago

 
In the CME cash dairy product trade, Dry whey was up $.0050 at $.3175 cents per pound.  Six sales were recorded from $.31 to $.3175. Forty-pound blocks were up $.0450 at $2.62 per pound. There were nine sales recorded from $2.5725 to $2.62. Barrels were unchanged at $2.40 per pound.  Two sales were recorded at that price. Grade AA Butter was unchanged at $1.7650 per pound.  No sales were recorded. Nonfat dry milk was down $.0075 at $1.0125 per pound.  One sale was recorded at that price.
 
The grain complex ran higher ahead of tomorrow’s USDA Acreage and Quarterly Grain Stocks report. December corn added 9.50 cents to $3.3475 per bushel.  November soybeans inched a quarter-cent higher to $8.6125per bushel. July soybean meal dropped $1.60 to $280.50 per ton. September Chicago wheat improved 10.75 cents to $4.8650 per bushel.  

Volatile Milk Future Markets in Chicago

As the Spot Chicago Mercantile Exchange stabilized Thursday, Class III pushes into extended limits during trading. Milk futures continued to slide Thursday as block cheese continues its descent and traders correct overbought positions. Class III milk finished the day June fell 9 cents to $20.92, July fell 62 to $20.94, and August fell 57 to $18.98/cwt. Balance of 2020 moved 7-40 cents lower. Class IV milk had June falling 17 to $13.08, July fell 30 to $14.45 and August fell 30 to $14.95/cwt. 

Dry whey up $0.01 at $0.3125.   Eight trades were made ranging from $0.3025 to $0.3125. Blocks down $0.050 at $2.5750.  Three trades were made at that price. Barrels unchanged at $2.40. Butter down $0.0225 at $1.7650.  Three trades were made ranging from $1.765 to $1.7750. Nonfat dry milk up $0.0075 at $1.0350.  Twelve trades were made ranging from $1.0250 to $1.350.

The grain complex fell sharply. July corn down 7 cents to $3.17 ¼, soybeans down 1 ½ to $8.69 ¼, and soybean meal fell $1.20 to $285.50/ton

Class III Sell Off in Chicago Drives Futures Down

In the CME cash dairy product trade, Dry whey down $0.0050 at $0.3025.   Six trades were made at $0.3025 and $0.3050. Blocks down $0.23 at $2.58.  Five trades were made at $2.58 and $2.81. Barrels up $0.03 at $2.40.  One trade was made at that price. Butter down $0.0250 at $1.7875.  Five trades were made ranging from $1.7875 to $1.7925. Nonfat dry milk down $0.0025 at $1.0275.  One trade was made at that price.

December corn finished 3 cents lower to $3.3375/bushel.  November soybeans fell 4 cents to $8.70/bushel.  July soybean meal gained 40 cents to $286.70/ton.  September Chicago wheat tumbled 5.25 cents to $4.8575.  June live cattle dropped 22 cents to $93.30/cwt.  August feeders gave up 32 cents to $132.87/cwt.  August crude oil finished $2.24 lower to $38.13.          

Blocks Push Higher as Futures are Mixed in Chicago Tuesday

On the Chicago Mercantile Exchange, milk futures were mixed Tuesday while traders test the limits of prices and cash cheese prices remain strong. Class III milk markets fell 19 cents to close around $22 perc wt. August and September fell 50 plus cents while 4th quarter prices weakened 12-30. 2021 prices were mainly unchanged on the day. Class IV markets dropped 5-10 cents in 2020 as well. 

Dry whey down $0.0075 at $0.3075.   Five trades were made at $0.3075 and $0.31. Blocks up $0.1075 at $2.81.  One trade was made at that price. Barrels up $0.0475 at $2.37.  Three trades were made from $2.36 to $2.37. Butter down $0.02 at $1.8125.  One trade was made at that price. Nonfat dry milk down $0.0025 at $1.03.  Two trades were made at that price. 

Grain markets struggled on Tuesday following uncertainty from China and U.S. trade talks held last week in Hawaii. Conflicting media reports out of the White House broke corn price 5 cents and soybeans were also down 4 cents. Cattle prices, on the other hand, rose $1-2 per cwt and feeders were also up to $1.50. 

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