In the Parlor to Plate podcast, Ever.Ag experts discussed concerns for dairy producers heading into 2024. They noted that while markets have been quiet, there are still dangers and concerns, particularly regarding milk prices. Analyst Colin Kadis noted that 2022 was one of the greatest years for dairy producers, despite higher costs. He also predicted that 2023 would be difficult, especially for Class III producers. While lower dairy prices are welcomed, global and domestic demand for some dairy product categories is lower. Brian Fletcher, a risk management expert, noted that if a demand resurgence occurs, it could lead to elevated prices. He suggested that if demand remains mediocre, more supply erosion is needed to stabilize prices. Kadis concluded that dairy farmers may not be excited to sign up for this, as they believed they had liquidated enough six months ago.

According to the United States Dairy Export Council, a record month of cheese exports did not overcome decreases in virtually all other dairy categories in November.

Total values fell 21% from 2022 to more than $630 million, while volumes fell more than 8%.

Cheese exports increased by 4%, with shipments to Mexico jumping by 42% for the month, owing mostly to increased demand for shredded cheese in food service. Exports of high-protein whey surged by 37% this month due to rising worldwide demand.

Nonfat dry milk/skim milk powder (-5%), low protein whey (-14%), and lactose (-7%) were all lower this month.

Mild winter conditions across most of the country have supported milk production though margins remain thin, especially for producers in the western U.S. Milk remains readily available for manufacturers.

The new year has officially begun. But as Auld Lang Syne faded into the background, the dairy markets were unsettled in the first holiday-shortened trading week of 2024. Most products saw prices oscillate without much conviction as buyers and sellers jockeyed to set the tone early in the new year.

Mild winter conditions across most of the country have supported milk production though margins remain thin, especially for producers in the western U.S. Bottling demand has picked up as schools go back into session following the winter break. But despite this pull, milk remains readily available for manufacturers. Spot loads of milk can reportedly be picked up for discounts as deep as $8 under Class III prices. While that feels like a big discount, it is less than the $10 discounts available last year at this time and which stretched through the first half of the year. Dairy Market News reports that, “most [contacts] expect milk prices to move nearer to Class III as the holidays grow more distant in the rearview mirror.”

All in all, milk remains available to cheese processors should they choose to accept it. However, tepid demand is dampening their enthusiasm for moving additional milk volumes through their vats. Market participants indicate that cheese inventories are plentiful, and that retail demand is stable to weak. Some are optimistic that football season will encourage additional cheese usage through both foodservice and retail channels.

Cheese production was robust in November, rising 0.7% year over year to 1.163 billion pounds. The increase was particularly notable given the 0.6% decline of milk production during the month. Manufacturers increased production of American varieties at the expense of Italian types, however Cheddar production failed to impress, falling 0.4% year over year to 322.57 million pounds. Robust production of cream cheese, up 5.7% to 91.737 million pounds, helped to boost the overall cheese figure.

The CME spot Cheddar block market reflected the uncertainty of supply and demand, gaining a penny on the first trading day of the new year before giving up ground on Wednesday and Friday to end the week at $1.435/lb., down 3.5¢ from last week. Barrels followed a similar path but a 4¢ gain on Tuesday netted out to a 1¢ gain for the week as Friday’s session finished at $1.41/lb. It was an active week for barrels as 26 load changed hands.

On the other side of the Class III complex, spot dry whey markets showed much more decisiveness, moving steadily upward over the course of the week. Friday’s session ended at 41.25¢ per pound, an increase of 2.75¢ compared to last week. Domestic demand is steady and export demand appears to be improving, especially from Mexican buyers. Whey manufacturers continue to route the whey stream toward the production of high protein products, which is likely helping to put some support under dry whey prices. In November, output of whey protein isolates and whey protein concentrates (WPC) with more than 50% protein rose by 16.4% and 7.5%, while production of dry whey and lower protein WPCs fell by 10.9% and 16.8%, respectively.

Strong cheese production pulled milk away from the manufacture of Class IV products late last year. Butter production declined during November as production fell 3.7% to 165.183 million pounds. Cream supplies are relatively plentiful as component values remain robust. Churns in many parts of the country are capitalizing on available supplies as operating schedules range from steady to active. Following the holidays, most butter market participants note that demand is understated. These dynamics were reflected at the CME as the spot butter market felt the biggest loss to start the year across all the commodities. A 2¢ increase on Tuesday was again wiped out by larger losses on Thursday and Friday. Butter prices fell to $2.575/lb. by the end of the week, a decline of 9¢ versus last week as 11 loads traded hands. Despite the decrease, butter prices remain almost 20¢ higher than a year ago.

Meanwhile the nonfat dry milk (NDM) market continues to move sideways. Modest gains early in the week were mostly eliminated by a decline on Friday that left the price at $1.1725/lb. up just a quarter cent compared to last week with 19 loads moving. The NDM market spent 2023 in a remarkably narrow range, trading between $1.0575/lb. and $1.3225/lb. the entire year. 2024 appears to have begun on the same note as the market looks for direction. Production remains weak as combined output of NDM and skim milk powder (SMP) totaled just 173.552 million pounds in November, a year over year decline of 17.3%. However, while NDM production tumbled by 28%, SMP production rose 17.8%, perhaps indicating that demand is perking up from export markets. On the demand side, domestic buyers are buying steadily. Participants are optimistic that the new year will bring additional interest from international buyers.

The grain markets saw some modest losses over the course of the week as slower export activity and improving South American weather pushed markets down. MAR23 corn contracts settled on Friday at $4.6075/bu. while MAR23 soybean meal settled at $369.4/ton. Lower feed prices will be welcome news to producers, but margins remain tight at the hand of stubbornly low milk prices, particularly for those with high Class III exposure.

Original Report At: https://www.jacoby.com/market-report/dairy-markets-unsettled-in-first-trading-week-of-2024/

In the first trading day of the new year, the Global Dairy Trade index increased 1.2%. The index has risen for the third trading event in a row.

The average price per metric ton was $3,363.

Values for whole milk powder increased 2.5% to $3,290 per metric ton, or $1.49 per pound.

Butter prices increased 2.1% to $5,514 per metric ton, or $2.50 per pound.

The price of anhydrous milk fat increased 0.2% to $5,595 per metric ton, or $2.53 per pound.

The price of mozzarella cheese remained stable at $3,960 per metric ton, or $1.79 per pound.

The price of butter milk powder fell 0.1% to $2,384 per metric ton, or $1.08 per pound.

Prices for skim milk powder fell 0.9% to $2,613 per metric ton, or $1.18 per pound.

The price of cheddar cheese fell 2.4% to $4,165 per metric ton, or $1.88 per pound.

Lactose prices fell 5% to $753 per metric ton, or $0.34 per pound.

In twenty rounds of trading on Tuesday, 155 victorious bidders acquired 26,206 metric tons of dairy goods.

With revised holiday sale dates, the dairy replacement heifer trade was modest countrywide through December. Between year-end 2022 and 2023, the average Holstein heifer springer price for the four reported markets was almost comparable, at about $1,700 per head. Global dairy demand is also in the “steady-but-uninspired” category for the end of 2023. Phil Plourd, President of Ever.Ag Insights, detected poor comments on dairy demand globally on Ever.Ag’s monthly Forecast Update Live webcast. “Until we see some traction in global demand, it’s difficult to believe that these markets can go much higher,” Plourd mentioned this. Meanwhile, beef-cross calves continue to be the year’s biggest dairy market story. In the last month, Holstein heifer calves in Pennsylvania averaged $50-90/head. Their beef-cross heifer equivalents were 7 to more than 10 times more expensive, ranging from $460-685/head.

The T.C. Jacoby Weekly Market Report Week Ending December 8, 2023

Cheese vats remain full, despite lower milk output. U.S. cheese production reached 1.19 billion pounds in October, up 0.8% from the year before. Given the continued investment in U.S. cheese production capacity, cheese output is likely to grow for the foreseeable future, to the detriment of U.S. cheese and Class III prices. But the details of U.S. cheese production offered some fodder for the bulls. In October, cheesemakers shifted milk into fresh cheeses like cream cheese and Neufchatel (+6.8% year-over-year), cottage cheese (+13%), Hispanic cheeses (+5.7%), ricotta (+12.2%) and Mozzarella (+2.3%).

Cheese vats remain full, despite lower milk output. U.S. cheese production reached 1.19 billion pounds in October, up 0.8% from the year before. Given the continued investment in U.S. cheese production capacity, cheese output is likely to grow for the foreseeable future, to the detriment of U.S. cheese and Class III prices. But the details of U.S. cheese production offered some fodder for the bulls. In October, cheesemakers shifted milk into fresh cheeses like cream cheese and Neufchatel (+6.8% year-over-year), cottage cheese (+13%), Hispanic cheeses (+5.7%), ricotta (+12.2%) and Mozzarella (+2.3%). Unlike Cheddar, fresh cheeses are made to be consumed immediately. They won’t show up on a Cold Storage report or at the CME spot market in Chicago. Stronger output of these cheeses hints at better domestic demand and greater export prospects for Mozzarella after a cruel summer of slower orders. The focus on these cheese varieties allowed U.S. cheesemakers to turn out 2.5% less Cheddar in October than they did the year before.

While the latest production data and reports of lower milk and cheese output in Europe fueled hopes for a rebound in U.S. cheese exports, shipments in October remained soft. The U.S. sent just 76 million pounds of cheese abroad in October, 3.4% less than the year before. Shipments to Mexico set a new high for the month, but sales to key buyers in Asia faltered, as cheaper European product dominated those markets. Despite the disappointing export data, U.S. cheese prices climbed this week, boosted by continued strength in European pricing and an impressive jump at Tuesday’s Global Dairy Trade (GDT) auction. CME spot Cheddar blocks rallied 6ȼ this week to $1.58 per pound. Barrels advanced 3ȼ to $1.55.

The Dairy Products report confirmed that whey processors have finally shifted more of the whey stream to whey protein concentrates and isolates, leaving less for the drier. Dry whey output slumped 1.2% below year-ago volumes in September and October output was down 2.6% year over year. Whey stocks waned, but they remain above year-ago levels for now, and exports are soft. Dry whey exports fell to 30.8 million pounds in October, down 37.6% from a year ago. U.S. whey exports are likely to struggle until Chinese hog producers are back in the black, and that may not happen until the Chinese economy finds its footing. Whey prices are holding above the summer lows, but they’re not climbing. This week CME spot whey slipped to 39.5ȼ, down a half-cent from last Friday.

Milk powder prices also retreated, despite convincing rebounds in both skim milk powder (SMP) and whole milk powder (WMP) values at the GDT auction. CME spot nonfat dry milk (NDM) lost 1.5ȼ this week and dropped to $1.165, the lowest price since September. U.S. milk powder output remains in the doldrums, as cheesemakers continue to pull milk and cream away from the dryer and the butter churn. Combined production of NDM and SMP totaled 169.1 million pounds, down 12.9% from October 2022. Manufacturers’ stocks of NDM dropped to 223.6 million pounds, down 10.8% year over year to the lowest stockpile since November 2019. But whittling down inventories through industry attrition is not enough to lift prices any further. We’ll need better global demand for milk powder or even steeper declines in milk powder output from Europe before prices can climb. For now, U.S. exports are too slow to provide much support. U.S. milk powder exports lagged last year’s volumes by 11.8% in October.

Butter production totaled 160.6 million pounds in October, down 0.9% from a year ago. Exports are abysmal, but it doesn’t matter. The U.S. has a butterfat deficit, and butter prices remain well supported. CME spot butter rallied 1.5ȼ this week to $2.67. That’s down significantly from the pre-holiday peak, but it’s still a pretty hefty price.

The setback in the milk powder market weighed on nearby Class IV futures. The December contract slipped 4ȼ to $19.20 per cwt., and January Class IV futures tumbled 28ȼ to $18.94. But deferred Class IV contracts gained a little ground this week and so did most Class III futures. However, Class III prices remain dishearteningly low. December Class III settled at $16.20 and January finished at $16.34. Further down the board, prices look more promising, but there will be plenty of red ink between here and there.

The corn market held in a relatively tight range. March corn futures settled today at $4.855 per bushel, up a fraction of a cent from last Friday. The soy complex continued to retreat. January beans closed at $13.04, down 41.5ȼ for the week. January soybean meal finished at $404.70 per ton, down another $8. There were no surprises in USDA’s monthly update to crop balance sheets. The agency confirmed that U.S. and global corn supplies are plentiful, while soybean and soybean meal stocks are tighter. The United States is going to crush a record volume of soybeans into oil and meal in the 2023-24 crop year. But soybean meal exports will also set a new all-time high, so U.S. dairy producers and livestock growers will have to pay up to keep their share of U.S. soybean meal at home.

Original Report At: https://www.jacoby.com/market-report/fresh-cheese-production-rises-unexpectedly/

Butter price movement has been spectacular over the last two and a half months. The butter price was $2.62 on August 30th and increased by 88 1/2 cents, hitting a record high of $3.50 1/4 on October 6th. The price then dropped 90 1/4 cents to $2.60 on November 10th. We believed the end of 2021 and most of 2022 would be a crazy ride for butter, but this year has surpassed that time. Even though prices gained $1.24 1/2 from late 2021 to early 2022, the market then chopped about for a while before continuing its uptrend, finally hitting a peak on October 6, 2022, before falling again.

Nothing like the current price movement has occurred in history. The last time prices decreased this quickly was in late 2014, when the price plummeted $1.29 from September 25th to October 28th. But we’ve never seen it fluctuate so rapidly in such a short period of time.

The insane component of the butter movement was not a fear of a butter scarcity this year, as it was in 2022. Exports fell more in contrast to 2021 and early 2022. Butter exports reached 2,294 metric tons in September, a 46.4% decrease from September 2022. To make things worse, exports in September 2022 were 35.5% lower than in September 2021.

September exports were the lowest since 2020, while the monthly amount of butter exports was the lowest since November 2020.

Domestic butter demand surged as the second half of this year progressed, increasing purchasers’ willingness to acquire stock ahead of time. Butter output has also slowed, while cream supplies have tightened and churning has been decreased. As bidders got more aggressive, the expectation of increased prices became a self-fulfilling prophesy. Once the purchasing frenzy was over, sellers were more aggressive in order to shift high-priced supplies as fast as possible, resulting in a downward leap-frog effect. It is unclear how far prices will fall, but it is yet another typical example of a market that always falls faster than it rises.

Not only are we dealing with decreased milk costs and decreasing demand for fluid milk consumption, but schools are also facing a milk carton scarcity that might last many weeks or months. According to Pactiv Evergreen, the main maker of milk cartons in North America, demand for half-pint milk cartons is much more than predicted. The immediate consequences will be felt in New York, Pennsylvania, California, and Washington. School authorities are trying to find alternatives to cartons or restricting milk options. Not only are schools at risk, but so are hospitals, nursing homes, and jails. I’m not sure how demand for half-pint milk cartons can be much greater than predicted. According to fluid milk sales figures, there hasn’t been an increase in demand from schools or other organizations. It seems that this primary corporation was unable to provide its consumers, forcing them to turn to other companies for supplies or alternatives. It is undeniably an intriguing market.

In September, the USDA reported a broadly mixed month for US dairy product output.

The overall cheese volume of 1.15 billion pounds was up 0.1% month on month but down 0.3% year on year, with advances in American and Hispanic cheeses wiping out losses in Italian cheeses.

In preparation for the holidays, butter output reached 145 million pounds, a 3% rise over the previous month and last year.

Dry milk product output was considerably lower, while whey product production was firm to higher, and frozen product production was lower than a year before.

The USDA will release its next set of dairy supply and demand estimates on November 9th.

On the Chicago Mercantile Exchange, milk futures and cash dairy markets were down on Tuesday.

November Class III milk went down $0.11 to $17.06 a gallon. December’s price went down $0.24 to $16.87. January saw a $0.16 decrease to $17.04. In February, the price went down $0.15 to $17.56. Contracts for March through September varied from unchanged in May and June to fifteen cents lower in April.

The price of dry whey remained steady at $0.3850. One transaction was reported at $0.3825.

At $1.6975, forty-pound cheese bricks were down $0.0025. There were no sales registered.

Cheese barrels fell $0.0350 to $1.5450. Seven transactions were registered, with prices ranging from $1.5450 to $1.5725.

At $2.8975, butter was down $0.1125. Twelve transactions were registered, with prices ranging from $2.89 to $2.93.

Nonfat dried milk fell $0.0050 to $1.17. At that price, one sale was recorded.

Reduced production and strong domestic consumption are showing up in dairy product production and inventory levels, offsetting weaker exports and setting the stage for the milk price rebound long foreseen in dairy futures markets and beginning to show up in dairy statistics. U.S. consumers continued their strong uptake of dairy during the summer.

READ REPORT

The T.C. Jacoby Weekly Market Report Week Ending October 27, 2023

SMP fell hard at the GDT Pulse event on Tuesday. It’s too soon to know whether the Pulse auction represents a good indication of global SMP values or if it can be dismissed due to limited participation in such a nascent event. But it certainly sparked fears about the health of global demand for milk powder.

A poor showing at the Global Dairy Trade (GDT) Pulse auction spooked the milk powder markets this week and another month of disappointing trade data from China added further fright. The GDT debuted its Pulse auction in August, offering an indication of trends in whole milk powder (WMP) prices in the weeks between the full bimonthly events. This month, GDT added skim milk powder (SMP) to the Pulse docket. SMP values stabilized at the GDT in September and staged a convincing recovery in the first half of October. But SMP fell hard at the GDT Pulse event on Tuesday, retreating 4.7% from the comparable contract at last week’s full auction. WMP prices also took a step back, slipping 1.1% from last week’s mark. It’s too soon to know whether the Pulse auction represents a good indication of global SMP values or if it can be dismissed due to limited participation in such a nascent event. But it certainly sparked fears about the health of global demand for milk powder. CME spot nonfat dry milk slipped 3.5ȼ this week to $1.1975 per pound.

Chinese dairy import data was similarly unsettling. China brought in less than 42 million pounds of WMP in September, the lowest volume in five years. Chinese SMP imports also notched five-year lows at 43 million pounds. All told, Chinese milk powder imports fell 29.5% from year-ago volumes. These numbers are disheartening but not surprising. The product that arrived on China’s shores in September was purchased months before, at a time when China was notably absent from the global marketplace. But Chinese milk production has fallen below year-ago volumes for several months now, and Chinese buyers have been a little more active at the GDT and elsewhere. China still has large milk powder stocks, but it’s possible that China’s appetite for foreign product will improve going forward.

China’s imports of other dairy products were more reassuring. Butter and cheese imports both topped year-ago volumes once again. Chinese whey imports fell 11.6% short of the September 2022 tally, but Chinese imports of U.S. whey jumped from the very low volumes seen in February through August.

Closer to home, indications of demand were similarly mixed. USDA’s Cold Storage report showed that cheese stocks declined 23 million pounds from August to September. There were 1.47 billion pounds of cheese in refrigerated warehouses at the end of last month, up just 0.2% from September 2022. The month-to-month decline was stronger than usual, which might hint that cheese demand was better than previously thought. But it’s more likely that buyers had some catching up to do after very slow sales in August. Inventories of American-style cheeses, including the Cheddar that determines CME spot market values, hardly budged, slipping just 2 million pounds for the month. American-style cheese stocks were up 0.9% from a year ago. There simply wasn’t enough good news in the Cold Storage report to prop up prices in Chicago. CME spot Cheddar blocks fell 5.75ȼ to $1.73. Barrels slipped 2.75ȼ to $1.6825.

Butter stocks dropped 16.3 million pounds from August to September, clocking in at 275.4 million pounds. Butter stocks declined at a rapid clip in June through August, but the drawdown last some momentum in September as soaring prices det would-be buyers. September 30 stocks were much lower than those seen in 2019 through 2021, which explains why prices climbed this fall. But inventories were 3% greater than in September 2022, undermining the argument that prices should top year-ago levels. CME spot butter prices dropped hard this week, plummeting 16.75ȼ to $3.1925 per pound. As grocers and buyers finish stocking up for the holiday baking season, prices are likely to fall further, echoing last year’s sudden selloff.

As it often does, the whey market bucked the trend. CME spot whey powder climbed a half-cent this week to 40ȼ, hitting that mark for the first time since April. Dairy producers can expect 60ȼ per cwt. more from their Class III checks with whey at 40ȼ per pound than they could when it was languishing at 30ȼ. Stronger Chinese imports of U.S. whey likely helped at the margins, but the real reason for the whey rally is a dramatic increase in domestic demand for high-protein whey concentrates.

With most dairy products in the red, both Class III and Class IV futures took a sizeable step back this week. November and December Class III futures lost 72ȼ and 80ȼ, respectively. The futures forecast milk in the mid-$17s into early next year. Class IV contracts lost nearly as much ground, but prices are much, much higher. The October contract settled at $21.60, with November a dollar lower than that and December at $19.49.

Combines are rolling and grain prices are falling. December corn settled today at $4.8075 per bushel,

down more than 15ȼ for the week. There is plenty of corn on the U.S. balance sheet to satisfy domestic demand and keep prices relatively low. Grain values will spike if the trade becomes worried about a steep decline in South American crop prospects, which would quickly boost U.S. corn and soybean exports. But the forecast calls for showers in the driest parts of northern Brazil and Argentina, so those fears are taking a backseat for now. Indeed, U.S. corn and soy export prospects have diminished in the past few weeks as the dollar strengthened and U.S. export logistics faced additional complications. Low water levels on the Mississippi River have reduced barge traffic, and – just as grain started to flow in the northern United States and southern Canada – a labor strike has shut down all shipping on the St. Lawrence Seaway, a vital artery connecting the Atlantic Ocean to ports on the Great Lakes.

Nonetheless, USDA reported a spate of new corn and soybean export sales this week, and soybean meal is leaving our shores at a record-setting pace. Argentina is the world’s largest soybean meal supplier, and the U.S. is filling in the vacuum left by last year’s very small Argentine soy crop. December soybean meal jumped to $442.40 per ton today, up $18.50 from last Friday.

Original Report At: https://www.jacoby.com/market-report/health-of-global-demand-for-milk-powder-sparks-fear/

On the Chicago Mercantile Exchange, milk futures and cash dairy markets were down on Tuesday, with the exception of cheese barrels.

November Class III milk was $17.19, a $0.10 decrease. December’s price was $17.05. January saw a $0.11 decrease to $17.32. February’s price went down $0.11 to $17.71. Contracts from March to September varied from twelve cents lower in March to three cents higher in May.

Dry whey fell $0.0075 to $0.3650. Twelve transactions were registered, with prices ranging from $0.3650 to $0.3725.

Cheese blocks weighing forty pounds were down $0.03 at $1.6850. Three transactions were registered, with prices ranging from $1.6825 to $1.6850.

Cheese barrels were $0.0050 higher at $1.6550. Four transactions were registered, with prices ranging from $1.65 to $1.6550.

Butter went down $0.02 to $3.28 per pound. There were no sales registered.

Nonfat dried milk fell $0.01 to $1.1875. One transaction was reported at $1.1975.

On the Chicago Mercantile Exchange, November Class III milk futures are down 16 cents to $17.67. December 33 is $17.56 lower. The January contract is down 12 cents to $17.85. Contracts are 9 to 18 cents lower from February to April.

Dry whey fell $0.0125 to $0.3675.

At $1.7425, blocks are down $0.0225.

Barrels are flat at $1.7350.

Butter has dropped $0.01 to $3.3650.

Nonfat dry milk is now $1.22, a $0.02 decrease.

The T.C. Jacoby Weekly Market Report Week Ending October 13, 2023

The butter market’s luck has changed dramatically. After repeatedly setting record highs since late September, the market descended in dramatic fashion this week. Despite the decline, butter prices remain historically strong as cream is tight and buyers are making their final orders ahead of the holiday season.

Whether or not black cats or broken mirrors were involved, the butter market’s luck has changed dramatically. After repeatedly setting record highs since late September, the market descended in dramatic fashion this week. A quarter cent loss on Monday was followed by another two-cent decline on Tuesday. After taking a breather on Wednesday, another 8.5¢ loss on Thursday and 3.5¢ decline on Friday ultimately pulled the price down to $3.36/lb. at the end of today’s trading session. Cumulatively, the market lost 14.25¢ compared to last week. Lower prices helped to facilitate trading as eight loads moved during the week.

Despite the decline, butter prices remain historically strong as cream is tight and buyers are making their final orders ahead of the holiday season. But while the fundamentals hold, nobody wants to be stuck holding expensive inventories if prices fall further, in some cases leaving buyers and sellers in a standoff. Export demand remains understated while the pull from retail is steady to lighter, depending on the region, according to Dairy Market News.

On the heels of the weak production figures disclosed in last week’s Dairy Products report, nonfat dry milk (NDM) markets found the traction to move higher this week, busting through the $1.20/lb. threshold for the first time since the end of February. Half-cent increases on Monday and Thursday were complemented by a 3¢ gain on Wednesday that ultimately lifted prices to $1.22/lb., up 4¢ compared to last week. A total of 14 loads moved during the week.

After listing sideways for months, the NDM market seems to have found the conviction to move higher, albeit in a measured way. Several market participants indicate that Mexican demand remains robust and, remarkably, could even be strengthening. Logistical bottlenecks at the border threaten to slow the movement of product, but they have not yet been severe enough to affect market sentiment. After months of lackadaisical activity, demand from other global regions is also appearing to perk up. Domestic demand for milk powders is healthy. Meanwhile, condensed skim is relatively available, but Dairy Market News mentions that several dryers are performing regular maintenance which will curtail throughput and could fuel additional market gains.

Within the Class III complex, most of this week’s drama was found with dry whey. The spot dry whey market appreciated every day this week, adding a total to 3.75¢ to the price. At the end of today’s session, the price stood at 33.5¢ per pound, the highest dry whey price seen since early May. Not only were the gains impressive but the market was thrumming with activity as 70 loads traded hands.

Dry whey prices appear to be tracking the entire whey portfolio up as manufacturers of whey protein concentrates and whey protein isolates are also seeing the value of their products increase. Domestic whey demand is healthy while export demand is at least steady.

Cheesemaking remains active but as spot milk is now consistently priced at a premium, the whey stream is not excessive. With a limited whey stream and healthy demand for lucrative higher protein products, dry whey production is likely to slip around the edges, keeping support under prices in the coming months.

The cheese markets were relatively subdued again this week as they waited for a signal to push them one way or the other. Cheddar blocks were mostly unchanged except for a quarter cent loss on Thursday as two trades were made which pulled the price down to $1.70/lb. Barrels were somewhat busier, notching gains on Tuesday, Wednesday, and Thursday, lifting the price to $1.645/lb. an increase of 6.75¢ compared to last Friday. This narrowed the block barrel spread to 5.5¢, the slimmest it has been since late July.

For the moment, cheese seems to have struck a balance between supply and demand. Cheesemaking remains active though several plant managers reported to Dairy Market News that their facilities are down for maintenance, potentially slowing production. Domestic demand is steady to higher, with particularly upbeat retail demand reported in the Northeast. While current price levels should be sufficient to generate some additional export activity, most stakeholders report that meaningful new international sales have yet to materialize.

Cooler autumn temperatures have improved cow comfort in many parts of the country and have boosted yields as a result. Milk and cream availability have increased somewhat though processors are still paying a premium to get their hands on spot milk for manufacturing.

Bottlers remain active, placing additional pressure on spot milk supplies. Class IV milk futures markets largely dismissed the weakness seen in the spot butter market as prices remained resilient. On Friday, the NOV23 Class IV settled at $20.88/cwt. The Class III markets were mixed as nearby contracts lost a few cents while contracts later in 2024 mostly appreciated. The NOV23 Class III contract settled Friday at $17.41/cwt.

USDA trimmed yield expectations for the 2023/24 corn and soybean crops in its World Agricultural Supply and Demand Estimates report, released Thursday. The agency dropped corn yields to 173 bu./acre, slightly lower than most analysts’ expectations, in turn reducing production by 70 million bushels. Soybean yields were reduced to 49.6 bu./acre, also modestly lower than the average trade estimate. Both corn and soybean futures moved up on the news though they retreated today. DEC23 corn futures settled Friday at $4.9325/bu. while DEC23 soybean meal futures settled at $390/ton.

Original Report at: https://www.jacoby.com/market-report/butter-market-descends-in-dramatic-fashion/

Milk futures were down in the short term but higher in the long term, while cash dairy markets were stable to higher on the Chicago Mercantile Exchange on Wednesday.

October Class III milk was $0.01 lower at $16.84. November’s price went down $0.10 to $17.23. December’s price went down $0.10 to $17.49. January saw a $0.07 increase to $17.99. Contracts from February to August varied from nine cents lower in July to twelve cents higher in February. July was the only month with a decreased price after January.

Dry whey was trading at $0.3150, up $0.0050. There were 21 transactions, with prices ranging from $0.31 to $0.3150.

For the third day in a row, forty-pound cheese blocks stayed steady at $1.7025, with no sales reported.

Cheese barrels gained $0.0075 to $1.6175. There were no sales registered.

The price of butter remained constant at $3.48. There were no sales registered.

Nonfat dried milk increased $0.03 to $1.2150. There were eight transactions, with prices ranging from $1.20 to $1.2150.

On the Chicago Mercantile Exchange, milk futures were neutral, while cash dairy markets were mainly higher, with the exception of butter.

October Class III milk was $0.03 lower at $16.85. November saw a $0.17 decrease to $17.33. December’s price went down $0.10 to $17.59. In January, the price went down $0.06 to $17.92. Contracts from February through August varied from unchanged in April, May, June, and August to five cents higher in July.

Dry whey was trading at $0.31, up $0.0075. Four transactions were made, with prices ranging from $0.31 to $0.3125.

For the second day in a row, forty-pound cheese blocks stayed steady at $1.7025, with no sales reported.

Cheese barrels increased $0.0325 to $1.61. There were two sales at $1.6025 and $1.6075.

Butter went down $0.02 to $3.48 a pound. There were two sales for $3.48 and $3.4850.

The price of nonfat dry milk remained steady at $1.1850. There were no sales registered.

The T.C. Jacoby Weekly Market Report Week Ending September 22, 2023

CME spot butter soared an astounding 28.25ȼ this week and closed right at the $3 mark. Exports are out of the question, but domestic demand is firm, and butter churns are running light.

Three dollar butter is back. CME spot butter soared an astounding 28.25ȼ this week and closed right at the $3 mark. Exports are out of the question, but domestic demand is firm, and butter churns are running light. Cream supplies are tight thanks to lower milk output and fierce competition from cheese vats and makers of whips and dips. Butter buyers are anxious as baking season looms large. They fear a repeat of last year’s persistently high prices and they’re chasing the market upward. October and November futures jumped 7.5ȼ today, the maximum gain allowed under the CME’s daily trading limits.

Milk powder prices also climbed, buoyed by a strong showing at the Global Dairy Trade (GDT) auction. Buyers in North Asia – which includes South Korea, Japan, and, most notably, China – snapped up more milk powder at the GDT than they have in two years, and they pushed prices higher to boot. Both whole milk powder (WMP) prices and the GDT Index rallied 4.6%, their second straight positive performance. GDT skim milk powder (SMP) finally showed some signs of life as well. In Chicago, CME spot nonfat dry milk (NDM) leapt 5.75ȼ to $1.17 per pound, matching its highest price since May.

Global milk powder production is slowing as milk output wanes and manufacturers direct milk to other uses. In Europe and the United Kingdom, milk collections topped year-ago volumes by just 0.2% in June and July, and driers ran light. New Zealand’s new season is off to a poor start. August milk solids output fell 0.9% from the prior year to the lowest volume since 2017. U.S. milk production continues to shrink. USDA trimmed its estimate of July milk output and now reports mid-summer production down 0.7% from July 2022. But August milk output was larger than expected, down just 0.2% from last year.

Lower milk production is obviously supportive of milk powder prices, but demand matters too. The market was relieved to see China getting more aggressive at the GDT, but it remains wary, and the latest round of trade data offered little fodder for the bulls. China imported less WMP last month than it has in any August since 2016. China’s year-to-date WMP imports also stand at seven-year lows. And Chinese SMP imports, which had been going strong, fell 36% short of year-ago volumes last month. Despite disappointing trade from China, the U.S. milk powder market is as taut as a bowstring. It will shoot even higher at the first sign that China’s appetite for foreign milk powder has recovered.

Whey powder followed NDM upward. CME spot dry whey gained a half-cent and reached 30.5ȼ. High-protein whey prices continue to climb, and manufacturers are sending more of the whey stream into concentrates, which is helping to tighten up supplies of whey powder. But the whey market is also capped by poor demand from China. Chinese imports of U.S. whey fell to a 17-month low in August.

Cheese bucked the trend and suffered huge losses this week. CME spot Cheddar blocks fell a dime to $1.78 per pound, a two-month low. Barrels were even worse. They plummeted 21ȼ to $1.60, also the lowest price in two months. High prices this summer have stymied export opportunities this fall, and, now that the heat has abated, there is more fresh Cheddar making its way to Chicago. The trade expects cheese output to remain strong, as Midwestern milk output held firm in August despite the heat. There are also plenty of cows in the cheese states. Dairy slaughter volumes are not running quite as hot as they did this summer, and USDA reported no change in cow numbers from July to August. However, the agency did trim its assessment of the July milk-cow herd by 10,000 head, confirming the prevalence of sellouts and very high cull rates this summer.

The setback in the cheese markets took a heavy toll on Class III prices. October Class III fell 94ȼ this week to an inadequate $17.16 per cwt. November was not much better. It dropped 99ȼ to $17.34. Fourth quarter Class III futures now average just $17.45, which will not pay the bills. Dairy producers outside the cheese states will enjoy much better prices, although the share of their milk check derived from Class IV is likely falling as underutilized balancing plants represent an increasingly small share of the blend price. October Class IV jumped $1.24 this week and both October and November Class IV topped $20 for the first time since February. Dairy producers will certainly welcome these higher prices. This has been a tough year on the farm, and they have a lot of rebuilding to do.

Choppers and combines are rolling through the Corn Belt. Yields are extremely variable, but most farmers have been pleasantly surprised at how well their corn has held up through strange and often unfavorable weather. There is plenty of corn, and prices are approaching two-year lows. December corn settled today at $4.7725 per bushel, up a penny from last week. Corn futures often notch their seasonal low in late September. This looks like an opportunity for dairy producers to lock in grain costs at relatively attractive levels.

Soybean supplies are much tighter, and the soy crop appears to have struggled a bit more than corn through the late-season heat and drought. Crop analysts warn that scarce soybean supplies could reduce the crush and limit soybean meal output over the next 12 months. Nonetheless, soybean and soybean meal prices continued to fade. November soybeans finished at $12.9625, down another 44ȼ this week. December soybean meal settled at $385.80 per ton, down $6.30 from last Friday.

Original Report At: https://www.jacoby.com/market-report/cme-spot-butter-soars/

The most recent U.S. dairy stock data indicates minor month-to-month reductions for August. According to the USDA’s Cold Storage report, cheese stockpiles are approximately 1.5 billion pounds, down slightly from the previous month but up 1% year on year. Total cheese and other varieties of cheese, such as mozzarella and parmesan, set new monthly highs. Butter stocks were down 12% from the previous month but up 4% from a year earlier, totaling little more than 289 million pounds.

Australia is on track to produce the least quantity of milk in 30 years, bringing dairy prices to all-time highs.

Australians can now hardly afford their own local goods because the dairy business has dropped so much.

However, there are still many people prepared to roll up their sleeves and tackle the problem.

In South Gippsland, farmer Benjamin Vagg’s mild encouragement is all that is required when 420 dairy cows arrive for their afternoon milk. After all, this is a $900,000 move.

Seven days a week, he begins his day at 5.30 a.m.

Vagg is half the age of the typical Australian dairy farmer, at 34. Even more unusual, he’s delighted about it.

“We have some of the best dairy farmers in the world In Australia,” Vagg said.

“It’s incredible. I’m sure I wouldn’t want to work in an office.

“In fact, I started my career out in a suit trying to be someone in a corner office in Melbourne somewhere, and then decided, ‘Nah I didn’t want to do that,'” said the man.

How Australia’s 44 referendums affected rent, railroads, and the republic

However, not everyone is as enthusiastic about farming as Vagg. 20,000 Australians got money milking cows back in 1980. There are now less than 4000 remaining.

According to Michael Whitehead of ANZ’s Agri-Insights, Australian milk output is declining year after year, with this year projected to be the lowest in three decades.

Whitehead has been keeping a careful eye on things, and he believes this is why dairy products are becoming so pricey.

“We’ve got the same number of dairy processing companies, so they have to compete to get an ever-shrinking supply of milk,” he said.

“That pushes up the cost, which cuts their margins and means higher prices at the supermarket.”

According to John Williams, president of the Australian Dairy Products Federation, it was one of the most difficult periods the sector has ever encountered.

Williams, who represents cheese, butter, and yoghurt producers, believes the high pricing will drive Australians away from pricey Australian dairy and toward less expensive imported products.

“Look it’s not lost on me in this market,” he said.

“In particular, consumers are having a difficult time right now due to cost inflation, but this is true across the board.”

“They’re going to make choices they probably weren’t making 12 months ago”

Australians are increasingly unable to afford to produce their own dairy. Cheaper, foreign goods are taking over the nation.

In fact, the quantity of New Zealand dairy in Australia is now about 30% greater than it was this time last year.

So, unless you’re quite certain you’re eating Australian dairy, you probably aren’t.

“It’s occurring right now. “Right now, two of the top four butter brands in Australia are imported,” Whitehead said.

Farmers like Vagg are opposed to imported butter being slathered on top of Vegemite… yet he claims he can’t sell his milk for much less.

After all, his expenses have risen as well.

When asked whether he felt sorry for the manufacturers who are now paying him top price, the harsh farmer said, “About time.”

“It’s more difficult for shoppers,” he admits.

Australians are discovering that they may purchase dairy that is either local or inexpensive, but not both.

According to the US Dairy Export Council, there are three major obstacles preventing exports this year.

Will Loux, Vice President of Global Economic Affairs, notes that the majority of July’s losses were due to a 40% decline in low-protein whey exports.

“We’re basically facing every headwind you can think of right now on the international market, with an absent China, a global economic crisis, and extreme competition from our major export competitors, and yet the US is only down 6%,” he adds.

For the first seven months of the year, dairy exports were down 12% in value. Loux expects China’s demand to increase, but the import mix will shift in the future.

“I believe you’ll see more skim milk powder imported for bakery and the like, or imported for ice cream,” he predicts. “I believe there will be more cheese going—we’ve seen that a lot this year.”

Cheese exports were unchanged (-1%) in July, with a resurgence in Japanese sales helping to overcome decreased demand. Nonfat dry milk/skim milk powder sales climbed significantly (+3%) due to increasing sales to Mexico.

According to the bank’s Q3 Global Dairy Quarterly, lower milk prices in most main global dairy-producing countries have started to result in decreased supply in recent months.

“However, in our opinion, a possible whiplash effect is becoming more likely,” said Lucas Fuess, senior dairy analyst at Rabobank in the United States.

“We may see a resurgence in demand emerging months before global milk output can recover,” he warned.

According to the data, milk output in Australia increased in May, marking the first month-on-month increase since mid-2021.

Growth continued in June, growing by 1.2%, bringing national output for the 2022-23 season to 8.129 billion litres, a 5% decrease year on year.

Rabobank forecasts a 2% increase in milk output in the 2023-24 season, owing to good on-farm profit margins and generally abundant feed and irrigation water availability.

According to the analysis, price signals for Australian dairy farmers are highly encouraging against a difficult global background, but larger price moves are unlikely until local and export market circumstances improve dramatically.

In 2022-23, Australian dairy export volumes fell. Total export volumes were down 15% for the season (up to May), with significant tonnage losses in skim milk powder (SMP), cheese, and liquid milk.

According to Rabobank, Australia’s exportable surplus will stabilize in 2023-24 owing to a modest milk pool recovery and slow domestic demand growth.

Rabobank has reduced its worldwide milk production prediction for 2023.

According to the analysis, milk production in the ‘Big 7’ export areas — New Zealand, Australia, the European Union, the United States, Uruguay, Brazil, and Argentina — is expected to increase by 0.3% year on year in 2023.

This decrease from the previous quarter’s forecast of 0.5% is due to output cuts in most significant worldwide areas, including the United States, the European Union, and New Zealand.

Global dairy production is anticipated to rise by 0.4% by 2024, significantly less than the 1.6% annual average increase witnessed from 2010 to 2020.

According to the research, attention is also focused on both supply and demand in China, where the severity of economic headwinds and the length of the halt in economic development are lowering the chances of a robust demand rebound.

Leading dairy processors indicate some market recovery, but this has yet to balance robust Chinese domestic milk production increase, according to Rabobank.

Milk production growth in the nation will decline in the second half of 2023 and early 2024, but no significant market rebalancing is predicted in the short future, and positive year-on-year imports are not forecast until late 2024 or early 2025.

Milk futures continued to fall, while cash dairy markets on the Chicago Mercantile Exchange were mixed Tuesday. September Class III milk was $18.29, a $0.10 decrease. October was down $0.46 at $18.04, representing a loss of $1.17 per hundredweight over the previous three trading sessions. November’s price went down $0.26 to $18.24. December’s price went down $0.13 to $18.25. Contracts for January through August varied from one cent higher in May to nineteen cents lower in June.

Dry whey was trading at $0.30, up $0.0050. Two sales of $0.2975 and $0.30 were reported. Cheese cubes weighing forty pounds were down $0.0550 to $1.87. At that price, one sale was made. Cheese barrels down $0.0225 to $1.8050. At that price, three sales were recorded. Butter was trading at $2.7225, up $0.0425. Four transactions were registered, with prices ranging from $2.69 to $2.72. Nonfat dried milk stayed steady at $1.10, although five transactions were reported at that price, in contrast to Monday’s absence of purchasing activity.

International milk prices and volumes rose at this month’s first Global Dairy Trade (GDT) auction on Tuesday.

The GDT Price Index was up 2.7%, with an average selling price of $2,888 per tonne. The index fell 7.4% at the previous auction on Aug 15, with an average selling price of $2,875, according to GDT Events.

A total of 37,729 tonnes of dairy products were sold at the latest auction, up about 12.4% from the previous sale, the auction platform said.

The auction results could affect the New Zealand dollar as the dairy sector generates more than 7% of the nation’s gross domestic product.

The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.

GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.

On the Chicago Mercantile Exchange, milk futures were up, while cash dairy markets were divided. September Class III milk was $0.07 higher at $18.58 a gallon. October saw a $0.26 increase to $19.21. November saw a $0.27 increase to $18.98. December was $0.16 higher at $18.73. Contracts from January through July varied from unchanged in April, May, and July to thirteen cents higher in February.

Dry whey fell $0.01 to $0.31. Two sales of $0.31 and $0.3175 were reported. The cheese market is calm, with forty-pound blocks remaining constant at $1.9625. There were no sales registered. Cheese barrels remained constant at $1.8675 for the second trading day in a row. There were no sales registered. Butter was trading at $2.73, up $0.01. Sixteen transactions were made, with prices ranging from $2.73 to $2.76. Nonfat dried milk increased by $0.01 to $1.10. There were fifteen transactions, ranging from $1.0975 to $1.11.

Milk futures on the Chicago Mercantile Exchange fell on Tuesday due to a stronger currency and little trading activity after the holiday.

September Class III milk is down seven cents to $18.54 a gallon. October is down four cents to $18.88. November is two cents higher at $18.61. The December contract is 11 cents higher at $18.55. Contracts for January through March are flat to three cents lower.

Dry whey increased $0.0150 to $0.32. From $0.31 to $0.32, three sales were made.

Blocks remain constant at $1.95.

Barrels are $0.0025 lower at $1.8675.

Butter increased by $0.05 to $2.71. There were 19 sales ranging from $2.70 to $2.71.

Nonfat dry milk has dropped $0.0175 to $1.0575. At $1.0750, five deals were executed.

The Global Dairy Trade index in New Zealand rose 2.7 percent on Tuesday, the most since the beginning of May. Whole milk powder gained the most, increasing by 5.3 percent, followed by anhydrous milk fat, which increased by 2.7 percent. Sales of buttermilk powder were down 6.5 percent.

This calendar year, Dairy Margin Coverage (DMC) payments have been triggered owing to a period of low milk revenue. Another wave of DDMC payments is likely to arrive in producers’ mailboxes shortly.

The July DMC margin of $3.52 per cwt. triggers Tier I indemnity payments across all coverage levels, from the catastrophic price floor of $4 per cwt. to the highest coverage level of $9.50 per cwt. At the highest coverage level of $9.50, the top payout is $5.98 per cwt.

According to Erick Metzger, general manager of National All Jerseys, milk covered at $9.50/cwt. will receive more than $4,461 in indemnity payments for each million pounds enrolled. Year-to-date payouts have reached almost $21,242 per 1 million pounds insured at the highest level.

According to Phil Plourd, president of Ever.ag Insights, farmers can also use risk management systems such as Dairy Revenue Protection (DRP).

“These are also times when we are reminded that risk management necessitates vigilance and diligence.” I doubt many people expected margins to be this low in 2023. “However, here we are,” he adds.

The DMC program was established by the 2018 farm bill to provide farmers with protection when the gap between the all-milk price and the average feed price falls below the producer-selected margin trigger.

However, the milk revenue margin seems to be improving in the August DMC figures, which will be released at the end of September. The DMC decision tool predicts an August margin of $5.66 per cwt as of the closing of futures trading on the Chicago Mercantile Exchange on Aug. 31.

According to Jim Mulhern, CEO of NMPF, DMC’s catastrophic coverage level is at the top of his team’s farm bill wish list.

“The basic DMC’s catastrophic coverage level includes up to 5 million pounds of annual protection, which is equivalent to a 200 to 220 cow herd.” “We’re looking at DMC’s tier 2 adjustments—anything above basic—because those markets collapsing would be more akin to a truly ‘catastrophic’ event,” Mulhern explains.

Farmers earned less money in July than in June.

According to the USDA, the farmer price index decreased 2.1% in July, with reductions in maize, hay, milk, and broilers more than balancing out increases in soybeans, pigs, lettuce, and strawberries.

The dairy index for July 2023 was down 2.8% from June and 32% from July 2022, with an all milk price of $17.40 per hundredweight, a $.50 decrease from the previous month and a $8.10 decrease from the previous year.

Higher movements in feeder cattle, concentrates, LP gas, and diesel offset reduced costs for feed grains, hay and forages, complete feeds, and nitrogen, resulting in a 0.1% increase in the index of prices paid.

The USDA’s index of prices received fell 7% year on year, showing losses sustained by certain producers, while the index of prices paid remained steady, indicating lowering inflation in portions of the business.

The T.C. Jacoby Weekly Market Report Week Ending August 25, 2023

U.S. milk output turned negative in July, as the heat took a terrible toll on milk yields. The milk production map and the July weather maps look nearly identical. The August weather map – and presumably the milk production map – will look much different. 

U.S. milk output turned negative in July, as the heat took a terrible toll on milk yields. Milk output totaled 19.08 billion pounds last month, down 0.5% from July 2022. The milk production map and the July weather maps look nearly identical. Simply put, milk output was down hardest where it was hottest. The August weather map – and presumably the milk production map – will look much different. Tropical Storm Hilary brought unusually mild temperatures to the West Coast, but the Upper Midwest is scorching. Through much of the summer, dairy producers in the heartland reported only modest declines in milk yields relative to the spring peak. But the bulk tanks are not as full today.

Dairy producers cashed a paltry milk check and some surprisingly large beef checks in July, and they culled hard. But the dairy herd barely budged. USDA estimates the dairy herd shrank by only 3,000 head in July. But the agency cut another 5,000 head from its estimate of the June milkcow head count, bringing the May-to-June decline to a steep 21,000 head. There were 9.4 million cows in U.S. milk parlors last month, 13,000 fewer than there were a year ago. A steeper setback in cow numbers is likely in August. Setting aside slaughter volumes in 1986 during the cow-kill program, dairy slaughter volumes have been record high for this time of year in four of the last seven weeks.

Both cheese and butter stocks tightened in July, which helps to explain the strong showing for both commodities in the spot markets last month. Butter inventories dropped 20.4 million pounds from June to July, an unusually steep decline. There were 347.5 million pounds of butter in cold storage warehouses last month. That’s 5% more than the very small volumes reported a year ago but considerably less than the mountain of butter in storage in July 2021.

In recent years, cheese stocks have typically grown from June to July, so this year’s 21.75-million-pound setback surprised. Cheese inventories tipped the scales at 1.489 billion pounds last month. That’s a lot of cheese, to be sure, but it’s 2.2% less than last year. The month-tomonth decline suggests that export deals booked earlier in the year helped keep product moving this summer. But today, with prices much higher, there are likely few buyers willing to return U.S. cheese exporters’ calls. After topping $2 last week, CME spot Cheddar blocks retreated, falling 8.25ȼ to a still lofty $1.945 per pound. Barrels slipped 0.75ȼ to $1.80. Butter also fell back from the recent highs, dropping 3ȼ to $2.67.

As always, the milk powder market took its cues from abroad. Whole milk powder (WMP) prices lost a little more ground at Tuesday’s Global Dairy Trade Pulse auction, and U.S. nonfat dry milk (NDM) values faded early in the week. Then after European and Kiwi skim milk powder (SMP) futures strengthened, CME spot NDM bounced back. It closed the week at $1.105, on par with last Friday.

The milk powder trade is desperately searching for any sign that Chinese WMP imports are set to improve. If you squint, the data looked a little less troubling than they once did. Chinese WMP imports topped year-ago volumes in May, June, and July. On its own, the monthly figures seem encouraging, with July WMP imports up 22.5% from a year ago. But a wider view paints a different picture. China is simply not importing WMP at the pace required to make up for this year’s very slow start. Chinese WMP imports are down 40.3% from last year to the lowest January through June total since 2016. Chinese imports of other dairy products look much better, with year-to-date imports of cheese, SMP, and whey at their second-highest totals on record, behind 2021.

Whey prices finally firmed this week. Spot whey climbed a penny to 28ȼ, their best showing in more than two months. USDA’s Dairy Market News explains, “Limited milk availability for cheese processing, along with recently firming high protein blend markets have created a slightly bullish safety net for a market that has been struggling to gain traction for the better part of the calendar year.”

Spot market action did not imply big gains for the dairy markets this week. But heat in the cheese states and a friendly Cold Storage report propelled Class III futures sharply higher. The September contract climbed 45ȼ to $18.94 per cwt. October Class III jumped 66ȼ to $18.65. The Class IV markets were less exuberant. September Class IV fell 35ȼ to $18.90, and deferred contracts lost a little ground as well.

The Corn Belt heat wave and the ProFarmer crop tour gave the grain trade a lot to chew on this week. After taking corn and soybean samples in seven states, the tour pegged the national average corn yield at 172 bushels per acre, below USDA’s August estimate of 175.1 bushels but comfortably near the market consensus. ProFarmer assessed the soybean yield at 49.7 bushels per acre, also below USDA’s August figure at 50.9 but slightly above last year’s tour average at 49.5.

The trade assumes that the soaring temperatures will not help either row crop, but, judging by the calendar, the impact will be much more severe for soybeans than for corn. With that in mind, November soybeans surged 34.5ȼ this week to $13.8775 per bushel and December soybean meal jumped $26 to $415 per ton. December corn futures bounced around but ultimately finished at $4.88, a nickel lower than last Friday.

Original Report At: https://www.jacoby.com/market-report/heat-takes-a-terrible-toll-on-milk-yields/

Milk price decreases have cost Irish dairy producers over 38% of their earnings in the last year.

Surprising new numbers have shown the magnitude of the financial crisis confronting dairy farmers throughout Cork as a result of continued milk price decreases, with over half a billion Euro wiped off their profits this year.

The data produced by the Irish Creamery Milk Suppliers organization (ICMSA) so sobering that organization president Pat McCormack calls them a “disaster for the rural economy.”

Dairygold was the latest processor to cut its July quoted milk price by 2 cents per pound to 36 cents per pound, with a spokeswoman claiming that “global milk markets continue to weaken due to pressure on demand in key markets, with no sign of near-term correction.”

To put the magnitude of recent milk price cuts into perspective, Dairygold paid its milk suppliers 55.5c/pl in June of last year.

This reflects a year-on-year decrease of little more than 35%.

According to the ICMSA, the persistent drop in milk prices has cost dairy farmers throughout the nation €2 billion in earnings, with Cork suffering the brunt of this.

According to their projections, milk income in Cork will equal €1,269,394.000 in 2022. According to the ICMSA, the income number for 2023 is now €777,865,000, a €491,529,000 or 38.7% decrease.

The ICMSA conducted a comprehensive examination of each of the 26 counties to determine the decrease in dairy farmer income over the previous two years.

The results reveal that milk values have dropped dramatically, with about €2 billion less estimated to be paid to dairy producers in 2023 compared to 2022.

ICMSA president Pat McCormack described this as “an astounding amount to lose” and predicted that it would have a “very serious impact” not only on dairy farmers but also on the wider rural economy this year and in 2024 as farmers tightened their purse strings and made drastic cuts to their spending.

“We all know that farmers spend in their communities, and many local services and businesses rely on them.” It is unsurprising to see dairy farmers’ spending power diminish considerably, as observed by companies in rural towns that offer products and services to dairy farmers and the larger dairy sector,” Mr McCormack said.

“From concrete to shed suppliers, to milking equipment to farm machinery, reports are coming back that dairy farmers have stopped buying and investing, and only the very basics are being purchased, and this is going to have a dramatic impact on the local economy,” he continued.

According to Mr. McCormack, with a dairy outlet multiplier of two, the overall loss to the Irish rural economy in 2023 may be as high as €4 billion.

“At the county level, we see Cork losing nearly half a billion in direct revenues, while Tipperary will lose nearly a quarter of a billion in direct revenues.” “With so many indirect jobs reliant on the dairy sector, the multiplier effect can bite even harder in these counties,” Mr McCormack said.

Given the current weather and pricing circumstances, the ICMSA research utilized an average total milk price of 59cpl for 2033 and a projected average price of 37cpl for 2023, with output predicted to reduce by 2% year on year.

“This means that nearly 38% of dairy revenues have been wiped away in the last year, and this analysis does not include the very severe cost elements facing dairy farmers, implying that dairy farm incomes will be severely impacted in 2023,” Mr McCormack added.

“While fertiliser prices have fallen slightly, most fertiliser was purchased at inflated prices earlier in the year or last year, and unfortunately, electricity and feed remain stubbornly high,” he said.

Mr McCormack urged Agriculture, Food and Marine Minister Charlie McConalogue to organize a meeting of the Dairy Forum so that a “clear strategy” could be put in place to kick-start an urgent recovery in milk prices.

“This is required not only by the farmers who produce the milk on a daily basis, but also by the larger rural businesses that rely on it for revenue,” Mr McCormack added.

On the Chicago Mercantile Exchange, milk futures and cash dairy markets were up on Thursday, with the exception of cheese and nonfat dry milk.

September Class III milk was $0.02 higher at $18.89 a gallon. October saw a $0.15 increase to $19.10. November was $0.24 higher at $18.78. December was $0.13 higher at $18.65. Contracts from January to July were six cents higher in February and thirteen cents higher in July.

Dry whey was $0.02 higher at $0.3050. One transaction was recorded at $0.30.

The price of forty-pound cheese bricks remained constant at $1.9925. There were no sales registered.

The price of cheese barrels stayed steady at $1.86. There were no sales registered.

Butter was trading at $2.6450, up $0.0250. Fourteen transactions were made, with prices ranging from $2.6450 to $2.67.

Nonfat dried milk fell $0.02 to $1.0725. There were four transactions, with prices ranging from $1.07 to $1.0850.

The Global Dairy Index fell 7.4% on Tuesday, its sixth consecutive trading day.

The Cheddar cheese market recovered, while all other items lost value.

The price of cheddar cheese increased 5.8% to $4,127 per metric ton, or $1.87 per pound.

Prices for whole milk powder declined 10.9% to $2,548 per metric ton, or $1.15 per pound.

Skim milk powder fell 5.2% to $2.333 per metric ton, or $1.05 per pound.

The price of anhydrous milk fat fell 5.3% to $4,452 per metric ton, or $2.01 per pound.

Butter prices dropped 3% to $4,539 per pound, or $2.05 per pound.

125 successful bidders purchased 33,580 metric tons of dairy goods in 20 bidding rounds during Tuesday’s trade session.

Since May 16th, the Global Trading Index has declined in all seven trading sessions.

A comprehensive examination of European inflation and its effects on dairy goods such as milk, cheese, and butter. In addition, the Idele conference in Paris last June examined record food inflation, consumption, and dairy commerce.

Christine Goscianski of the Idele economics service reminded the audience in her presentation that 2022 saw unprecedented food inflation. Food consumption prices in the EU-27 increased by over 12% in 2022 compared to 2021. This rise was smaller in some countries, such as Ireland (+6.9%) and France (+7%), while it was larger in others (+12.6% in Germany, +13% in Portugal, and +14.5% in Poland). This rise in food costs was matched by an increase in distributor brand market share (+2.3% in Spain, +1.4% in Germany, and +0.5% in France).

“The beginning of 2023 was marked by a sharp acceleration in the rise of food prices in Europe, with an increase in sales of consumer products at discount (+1 point between January 2022 and January 2023),” Goscianski said, adding that consumption of dairy products held up rather well in the EU-27 in 2022, but should fall in 2023 as a result of high food inflation.

Germany has seen unprecedented food inflation.

In 2022, the price of dairy goods in Germany increased by 20-40% compared to 2021: +21% for Emmental and UHT milk, +22% for Gouda, and +41% for butter. This resulted in a decrease in dairy product purchases, which was most noticeable in liquid milk (-6% over the past 12 months, -9% in March 2023) and fresh cheeses (-7% over the last 12 months, -9% in March 2023).

Organic milk is losing market share to vegetable juices and pasture milk as costs climb sharply, affecting the organic sector. Finally, rising food prices in Germany increased trade in dairy goods, impacting both exports and imports.
France: Trade balance decline

In France, there are four factors to consider when it comes to inflation:

a +7.9% increase in dairy product prices in 2022 in stores, with the highest increase for dairy fat (+11.7%) and even higher in-store prices in early 2023; a -2.5% decrease in dairy product sales in 2022 in stores, with the largest drop being for butter (-6.8% over 12 months); consumer arbitrage: buy less and downscale (increasing use of private label ranges, fewer organic products purchased, success of discounters);

Italy has one of the lowest rates of inflation.

Despite having one of the lowest rates of food inflation in Europe, Italy had a 10-20% increase in food costs in 2022, depending on the product: +9.8% for UHT milk, +20.8% for butter.

“However, the beginning of 2023 is marked by a slowing in this rise in food prices, particularly those of dairy products,” said the speaker, who noted that the discount market share has increased from 17.5% of sales in value in 2019 to 20.6% in 2022, despite a very high rise in prices in this channel.

Organic purchases in Italian households declined from 3.9% in 2021 to 3.6% in 2022. In 2022, trade in value increased with inflation (both for imports and exports), but the balance contracted.

Strong inflation in the United Kingdom

Food costs increased by 16.9% in 2022 and then skyrocketed in early 2023 (+33% for milk and 39% for cheddar cheese in April 2023). While dairy product sales are down, cheese sales are holding up better.

“We also see a decrease in the range of dairy product consumption, and branded milk volumes are declining faster than private-label products,” Goscianski added.

Organic milk volume sales are falling considerably (-13.5% in 2022/2021 against -5.6% for non-organic milk). Organic dairy products accounted for 2.9% of total dairy retail volume in 2022. Finally, like with the other European nations, volume exports are increasing, but the value balance is worsening.

Conclusion

Inflation currently affects food goods more than other things:

In the EU-27, consumer prices increased by 9.1%.
Food costs increased by 18.2% in the EU-27.

Eurostat data: January-April 2023/January-April 2022

Inflation has a particularly large influence for dairy goods.
Consumer inflation arbitrage: less amounts bought, more private label, less organic, discount success. Store sales of dairy goods seem to be improving.

In-store purchases in France in 2022 (in volume):

Beef: -6.4% Eggs: -1.6% Dairy products: -6.4% -2.5% Fruits and vegetables: -5% Fish: -12%

For a few weeks, general inflation has been lower, with food inflation falling marginally in May.

In Friday’s supply and demand report, the USDA reduced its milk output predictions. The USDA anticipated 2023 milk production at 228.4 billion pounds in July, but their August update reduces that estimate to 227.9 billion pounds.

The predicted cow inventory is lower for this year and 2024, while the expected production per cow is lower for 2023 but unchanged for 2024.

Because of recent price increases, the study upped the predicted 2023 butter and cheese prices. Whey pricing expectations for this year have been reduced. Nonfat dry milk (NDM), Class III, and Class IV have a better prediction. In 2023, the all-milk price will rise to $19.95 per cwt.

Butter and cheese costs are expected to rise in 2024, while whey prices are expected to fall. Nonfat dry milk prices are expected to remain stable. Class III and IV pricing are higher due to increased product costs. The predicted all-milk price in 2024 has been increased to $19.35 per hundredweight.

The USDA anticipates reduced dairy imports and exports in the United States. Imports of fat and skim-solids have been reduced from previous month due to lower-than-expected imports of cheese and butter. The prediction for fat basis exports in 2023 has been reduced owing to decreased exports of cheese, butter and butterfat products, and whole milk powder. The projection for skim-solids exports is lower, owing mostly to reduced whey product sales.

Following Fonterra’s modification of the farmgate milk price prediction earlier today, RaboResearch Senior Agricultural Analyst Emma Higgins provides analysis below.

The farmgate milk price forecast has been drastically revised. Fonterra has reduced its prior midpoint of $8.00/kgMS by $1.00/kgMS, with a new midpoint of $7.00/kgMS for the current 2023/24 milk production season. The new milk price estimate range is $6.25/kgMS to $7.75/kgMS.

Before dawn, it is always the darkest.

Dairy commodity prices are currently lower than 5-year norms after this week’s GDT auction. This is a big movement in dairy commodity price, which has been occurring since the second quarter of last year. It will be difficult for individuals who are going through this moment of transition.

Costs have risen 13% year on year. The agricultural price expenditure index for Q1 2023 reveals that total input prices increased 13% year on year (Q1 23 vs. Q1 22). Interest rates are the greatest movers (+50% year on year), followed by fertilizer (+11% year on year), dairy shed expenditures (+11%) year on year, and insurance premiums (+9% year on year). At the same time, Fonterra’s farmgate projection mid-point fell 11% year on year.

Fonterra’s newest farmgate predicted mid-point (August 2023) is 24% lower than the same time in 2022.

The drop is primarily due to decreasing import demand from China, which is now experiencing a milk boom that has been building for many years. Production growth is moderating, which is what markets want for rebalancing, but the pace of increase in the first half of 2023 has surpassed our expectations. Milk supply increased 7.5% year on year in the first half of 2023, with a slowing in Q2 compared to Q1.

The dairy commodities markets are going through another cycle.

The markets are now sluggish and tough. However, we do not believe that this is a super-cycle slump.

For comparison, during the dairy slump (seasons 2014/15 – 2015/16), the milk price fell from $8.40/kgMS (2013/14) to $4.40/kgMS (2014/15). When adjusted for inflation, it equates to the milk price in today’s terms falling from over $10.60/kgMS to $5.50/kgMS.
There are some signs of hope for pricing out there.

The triggers for a rebalancing inside China are in action, as indicated in our recent Agri Monthly report (attached). Milk prices are falling, cost pressures are increasing, and farm growth is stalling. China is reopening, but demand settings remain weak and unpredictable.

RaboResearch argues that inventory levels in dairy markets are low outside of China. This is a significant departure from the Dairy Downturn era, when certain dairy commodity prices, notably SMP, were under pressure for a prolonged length of time because to EU intervention inventories. Another significant distinction between the Dairy Downturn and this time is that the supply picture is considerably more modest. Whether it’s pricing pressure in the US, weather concerns in parts of the EU, or even El Nino dangers in the future, the challenge for milk supply growth from key exporting nations is evident.

In the future, New Zealand milk production will need consistent weather. Budgets will not appreciate spring storms or anything going wrong in the closing months of winter.

Rabobank is presently working on its third quarter dairy quarterly report, which will contain an updated milk price estimate. This is scheduled to be published in early September.

The T.C. Jacoby Weekly Market Report Week Ending July 28, 2023

Cheese and butter prices both jumped once again this week. The sudden strength in the cheese market reflects a shortage of Cheddar that is fresh enough to trade at the spot market in Chicago, a phenomenon that can lead to dramatic but often short-lived spikes in the sultry summer months.

The dairy markets are still feeling that summer sizzle. Cheese and butter prices both jumped once again this week. CME spot Cheddar blocks leapt 12.5ȼ to $1.9075 per pound. That put them higher than year-ago prices for the first time since early February. Barrels rallied 10.75ȼ to $1.7625. The sudden strength in the cheese market reflects a shortage of Cheddar that is fresh enough to trade at the spot market in Chicago, a phenomenon that can lead to dramatic but often short-lived spikes in the sultry summer months.

Fresh Cheddar may be scarce, but there is plenty of cheese. On Tuesday, USDA reported 1.51 billion pounds of cheese in cold storage warehouses on June 30, the highest mid-year inventory on record. Stocks were 0.3% greater than in June 2022 and they grew 12.6 million pounds from May to June, a month in which cheese stocks often shrink. Inventories of American-style cheeses did decline modestly last month, but, at 853.3 million pounds, they were still up 0.8% from a year ago and notched the highest June stocks figure on record.

CME spot butter hiked to a new peak this week, touching a fresh 2023 high Thursday at $2.6925. It finished at $2.68, up 9.75ȼ since last Friday. Tuesday’s Cold Storage report helped to explain butter’s impressive summer climb. Butter stocks dropped unexpectedly in June, falling 20.4 million pounds last month to 347.5 million pounds. Stocks are 5% greater than the uncomfortably tight levels from this time last year, but they’re quite a bit lighter than butter buyers would like to see ahead of the fall baking season. Meanwhile, cream multiples are ramping up as scorching temperatures take a toll on milk production and components.

CME spot nonfat dry milk also logged impressive gains. It climbed 4ȼ to a six-week high at $1.16. Lower milk production is reducing the lineup of trucks at driers, and production is falling accordingly. Meanwhile, export demand remains strong thanks to robust orders from Mexico.

Spot whey powder slipped 0.25ȼ to 25ȼ per pound. USDA’s Dairy Market News describes demand for whey as “lackluster.” Cheese vats are full and whey production continues apace, leading to some concerns about storage space for dry whey and other dry products. It’s going to be hard to lift whey prices significantly when the trade is worried about having enough places to stash it.

Strong spot cheese prices propelled August Class up 55ȼ this week to $17.26 per cwt. Other Class III contracts finished a few higher, and fourth-quarter futures averaged $18.43. Class IV futures logged strong gains. The August contract advanced 52ȼ to $19.05. Fourth quarter futures rallied about 70ȼ to an average of $19.33.

Today’s futures prices are considerably better than those that determined the June milk checks or those on which July milk revenue will be based. But they’re still not enough to pay the bills on many farms, especially for producers who will continue to suffer discounts on their already-low Class III revenue. Dairy producers are leaving the industry in growing numbers, and dairy slaughter volumes remain high. The milk-cow herd continues to shrink, setting the stage for higher prices in the year to come.

It’s certainly hot, but the weather was not as dry as feared. Scattered showers moved across the Corn Belt and they’re expected to do so again next week. But moderate drought persists in most of the Farm Belt, and crop yields likely continue to slip. December corn futures fell 6ȼ this week to $5.3025 per bushel. November soybeans closed at $13.825, down 19.5ȼ. September soybean meal closed at $433.60 per ton, up another $7.30.

Source;  https://www.jacoby.com/market-report/dairy-markets-still-feeling-the-summer-sizzle/

Fonterra has indicated that it would lower its expected Farmgate Milk Price range for the 2023/24 season.

According to the cooperative, the range will be reduced from $7.25 to $8.75/kgMS to $6.25 to $7.75/kgMS, with the midpoint dropping from $8.00 to $7.00/kgMS.

The news comes after the price of whole milk powder (WMP) fell 7.29% earlier this week on the Global Dairy Trade (GDT) auction platform, bringing WMP prices to their lowest level since early 2019.

According to Fonterra CEO Miles Hurrell, the updated pricing range reflects continuous lower import demand for whole milk powder from Greater China.

“When we announced our opening 2023/24 season forecast Farmgate Milk Price in May, we noted that it reflected our expectation that China’s import demand for whole milk powder would increase in the medium term,” Hurrell explains.

He claims that total GDT whole milk powder WMP prices have dropped 12% since then, with China’s portion of WMP volumes on GDT events following below-average levels.

“This reflects China’s current surplus of fresh milk, resulting in increased levels of local production of whole milk powder and a reduction in near-term whole milk powder import requirements.”

“The medium to long term outlook for dairy, particularly New Zealand dairy, looks positive, with milk production from key exporting regions flat compared to last year,” Hurrell adds.

Milk futures on the Chicago Mercantile Exchange fell Thursday, extending the week’s gloomy trend, while cash markets were mainly down. Class III milk for August is down 40 cents to $17.09. September is down 34 cents to $17.19. The October contract is down 30 cents to $17.67. November is 22 cents cheaper at $18.00. Contracts from December to February are five to fifteen cents lower. At $0.2650, dry whey is up $0.0025. Two transactions were made at prices ranging from $0.2625 to $0.2650. Blocks are constant at $1.96. Barrels have fallen $0.0450 to $1.8250. At $2.6150, butter is down $0.0150. At $1.12, nonfat dried milk is down $0.0025. At $1.12, two deals were completed.