On the Chicago Mercantile Exchange milk futures carried their optimism through Thursday for the holiday-shortened week, supported by cash trade. April Class III futures were down 9 cents to $17.51/cwt.  May milk jumped 18 cents to $18.41/cwt.  June milk finished 16 cents higher to $18.60/cwt.  July milk shot 27 cents higher to $18.69/cwt.  Class IV saw gains of 3-11 cents in 2021 with 2022 up 8-20 cents. 

The CME Cash Dairy Product Trade posted strong gains to start the month of April.   Blocks up $0.0375 at $1.7750.   Two trades were made at $1.7350 and $1.7750. Barrels up $0.03 at $1.5125.   Four trades were made ranging from $1.49 to $1.5125. Butter up $0.0275 at $1.8450.  Seven trades were made ranging from $1.8275 to $1.8450. Nonfat dry milk up $0.0050 at $1.19.  Four trades were made at $1.1850 to $1.19.  Dry whey unchanged $0.66. 

The grain markets turned around after initial strength on the Wednesday night open.  New crop corn and soybeans were able to maintain gains.  May corn decreased 4.50 cents lower to $5.5975.  May soybeans took a nosedive of 34.75 cents to $14.02/bushel.  May soybean meal retreated $13/ton to $410.20/ton.  May Chicago wheat declined 7 cents to $6.11/bushel. 

On the Chicago Mercantile Exchange milk futures turned higher following the release of USDA’s prospective plantings and stocks reports. Milk markets saw a quiet CME spot trade but Class III took its ques from the grains. Class III milk in May and June touched 75 cents higher, but finished the day with April up 43 to $17.60, May up 67 to $18.23, and June up 61 to $18.44/cwt. Class IV also jumped higher with April up 14 to $15.59, May up 26 to $15.96, and June up 26 cents to $16.29/cwt.

The spot trade saw dry whey up $0.03 at $0.66.  Three sales were made ranging from $0.6350 to $0.65.  Blocks down $0.01 at $1.7375.   Two trades were made at $1.72 and $1.73. Barrels up $0.0025 at $1.4825.  Butter down $0.0050 at $1.8175.  Eight trades were made ranging from $1.8050 to $1.8325. Nonfat dry milk up $0.0050 at $1.1850.  Three trades were made at $1.18 to $1.1850. 

The T.C. Jacoby Weekly Market Report Week Ending March 26, 2021

Cheese manufacturers report that demand has improved from both domestic and international sources. Even with improved demand, supply remains more than ample and inventories are growing.

Spot cheese market observers are recovering from whiplash this week after watching the price dip then rally. Cheddar blocks lost 3¢ on Monday, 4.5¢ on Tuesday, and another 4.5¢ on Wednesday, before the winds changed course. Gains of 3¢ and 2¢ on Thursday and Friday helped to erase some of the loss, but at $1.72/lb. spot Cheddar blocks still finished the week 7¢ lower than last Friday. In the case of barrels, despite giving up 1.5¢ on Monday, modest gains on Tuesday, Thursday, and Friday pushed the price up to $1.4625/lb., a penny higher than last week. As a result, the block barrel spread narrowed to 25.75¢ on Friday.

Cheese manufacturers report that demand has improved from both domestic and international sources. As Covid-19 dining restrictions are rolled back unevenly across the country, foodservice demand is firming, a trend that is likely to be particularly supportive for Italian style cheeses. Even with improved demand, however, supply remains more than ample, and inventories are growing. Total cheese stocks at the end of February reached 1.436 billion pounds, an increase of 27.8 million pounds compared to January. Though this increase exceeds the five-year average over the same period, it remains lower than the gains seen in 2017 and 2018. Other cheese stocks built somewhat faster than American cheese stocks, indicating that manufacturers have had more luck moving Cheddar and other American style cheeses into the market, likely through retail channels.

On the other side of the Class III complex, whey prices showed no relenting this week, continuing their upward charge to hit yet a new record. Spot whey added 1.5¢ on Wednesday as two loads traded to move up to 62.75¢/lb., a new record for the three year old market. Demand is robust from both domestic and global users, even as logistical complications persist. Insatiable demand from China continues to underpin the global whey market. Chinese imports of whey hit a record high 277.1 million pounds during January and February, a 52.7% increase versus the same period last year after accounting for the leap day. Hefty Chinese dairy imports in January and February set records across many categories including milk powders and fluid milk.

Moving over to Class IV products, the butter market was able to make up some ground this week. After seeing increases Tuesday through Friday, the spot butter price ended the week a full 11¢ higher than last Friday at $1.775/lb. Even as cream remains plentiful, foodservice activity has picked up and retail demand is robust as Easter and other spring holidays approach. Butter inventories totaled 352.7 million pounds at the end of February, an increase of 6.3% or 20.8 million pounds compared to January. This increase is less than half of the five-year average build of 43.5 million pounds between these two months, indicating that product is indeed moving into commercial channels. Nevertheless, butter stocks remain historically heavy, and the market will have to work through these inventories before returning to balance.

After dropping 1.25¢ on Monday, the spot nonfat dry milk (NDM) market was also able to do an about-face. Moving upward on Tuesday and especially Thursday, when 12 loads traded hands, the market ended the week at $1.17/lb., up 1.75¢ compared to prior week. Plentiful condensed skim continues to stifle more dramatic price increases but demand has at least remained sufficient to keep some tension in the market. International demand from both Mexico and overseas markets has remained substantial though manufacturers report that higher prices are causing some global buyers to balk. At 192.6 million pounds Chinese imports of skim milk powder during January and February set a new record, though the vast majority of this product was supplied by New Zealand.

Even though the overarching demand picture appears to be brightening, there is still a risk that the gains will be outpaced by supply. Milk is plentiful, particularly in the West where the spring flush has arrived convincingly. Dairy Market News reports that milk production is heavy in California, with output rising in nearby states. Spot loads of milk are generally

available across the country and can be procured for processing needs at several dollars under the Class III price in the Midwest. Class I demand has slipped modestly over the last week as educational institutions have been on spring break but pull from the bottlers is expected to improve following the holiday.
The milk futures markets followed the trends set by the spot market. Most nearby Class III contracts lost value on Monday, Tuesday, and Wednesday before staging a bit of a recovery on Thursday and Friday, ultimately gaining some value over the course of the week. In the Class IV market, after bobbling earlier in the week, gains on Wednesday, Thursday, and especially Friday, pulled contract values up. Every Class IV contract between APR21 and SEP21 settled at least a quarter higher on Friday than on Monday.

The markets generally moved sideways as the trade waits for USDA’s Prospective Plantings report scheduled for release next week. High prices are expected to drive additional plantings of both corn and soybeans though the scale of the increase remains to be determined. Most nearby corn futures contracts settled no more than a couple cents different on Friday than on Monday. Soybean futures were a bit more active, moving up on Tuesday and Wednesday before descending again on Thursday and Friday. Though the moves weren’t enormous, most nearby contracts settled lower on Friday than on Monday.

Source: Jacoby

On the Chicago Mercantile Exchange milk futures continue to trade narrowly mixed ahead of this week’s prospective plantings and stocks reports while cash markets are quietly higher. Class III milk futures had very little change on Tuesday as well as low trading volumes once again.  April paced the market moving 161 contracts between sellers and buyers with settlements ranging from 5 cents higher to five cents lower in 2021.  Class IV values performed a little better strengthening 4 to 22 cents.

Neutral to stronger spot dairy product results were witnessed in the Tuesday trade led by butter.   Butter up $0.03 at $1.8225.  Three trades were made ranging from $1.8150 to $1.82. Nonfat dry milk up $0.0050 at $1.18.  Dry whey up $0.0025 at $0.63.  One sale was made at that price.  Blocks unchanged at $1.7475.  Barrels unchanged at $1.48. 

On the Chicago Mercantile Exchange Monday milk futures remained narrowly mixed while cash trade was higher. Class III futures were mixed, showing very little reaction to the higher spot trade. March milk remains at $16.18 per cwt.  April milk gained 6 cents to $17.14 per cwt.  May lost 6 cents to $17.46.  Little change was seen throughout the rest of 2021.  No volume was seen in class IV.

CME spot values stayed steady to higher across all 5 products.   Blocks up $0.0275 at $1.7475.  Seven sales were made ranging from $1.72 to $1.7475.  Barrels up $0.0175 at $1.48.  Butter up $0.0175 at $1.7925.  One trade was made at that price. Nonfat dry milk up $0.0050 at $1.1750.  Dry whey unchanged at $0.6275. 

Corn and soybeans moved lower in head of Wednesday’s Quarterly Grain Stocks and Prospective Plantings Report. May corn lost 5.75 cents to $5.4675.  May soybeans settled 7.50 cents lower to $13.93 per bushel.  May soybean meal retreated $5.90 to $398.10/ton.  May Chicago Wheat improved 3.50 cents to $6.1675 per bushel. 

Cooperatives Working Together (CWT) member cooperatives accepted 14 offers of export assistance from CWT that helped them capture sales contracts for 354,958 pounds (161 metric tons) of Cheddar, 408,958 pounds (186 metric tons) of butter, and 374,786 pounds (170 metric tons) of cream cheese.The product is going to customers in Asia, North Africa, and Oceania. It will be delivered during the period from April through August 2021.

CWT-assisted member cooperative year-to-date export sales total 11.561 million pounds of American-type cheeses, 8.757 million pounds of butter (82% milkfat), 3.649 million pounds of AMF, 13.541 million pounds of whole milk powder, and 4.239 million pounds of cream cheese. The products are going to 26 countries in six regions. These sales are the equivalent of 534.9 million pounds of milk on a milkfat basis.

Assisting CWT members through the Export Assistance program positively affects all U.S. dairy farmers and dairy cooperatives by strengthening and maintaining the value of dairy products that directly impact their milk price. It does this by helping member cooperatives gain and maintain world market share for U.S dairy products. As a result, the program has significantly expanded the total demand for U.S. dairy products and the demand for U.S. farm milk that produces those products.

The amounts of dairy products and related milk volumes reflect current contracts for delivery, not completed export volumes. CWT pays export assistance to the 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.

On the Chicago Mercantile Exchange milk futures turned positive Thursday following the release of USDA COVID funding details and supportive cash trade. Class III milk fell 4 cents in March to $16.19, but April gained 18 cents to $16.80, May gained 12 cents to $17.32 and the balance of 2021 was 2-18 cents higher. Class IV milk also saw green. March was unchanged at $14.30, Aprils up 16 cents to $15.02, and May up 9 cents to $15.31 per cwt. The balance of 2021 was unchanged to 6 higher.

The CME had all 5 products moving higher.  Blocks up $0.03 at $1.70.  Two trades were made at $1.6725 and $1.70.   Barrels up $0.02 at $1.46.  One trade was made at that price.  Butter up $0.0150 at $1.7375.  Nonfat dry milk up $0.02 at $1.17.  Twelve trades were made at $1.1525 and $1.17. Dry whey unchanged at $0.6275. 

Grain and feed was weaker. Corn fell 6 ¾ cents to 5.46 ½, Soybeans fell 18 ½ to 14.14 ¼, while Soybean meal gained $3.60 to $404.60/ton.

On the Chicago Mercantile Exchange milk futures remained under pressure at midweek while cash trade was mixed.  Class III milk slid lower with March down 1 cent to $16.23, April down 9 cents to $16.62, and May fell 28 cents to $17.20 per cwt. Class IV milk followed the strength in butter. March unchanged at $14.30, April gained 9 cents to $14.86, and May up 8 cents to $15.22 per cwt.

The spot CME trade saw dry whey up $0.0150 at $0.6275.  Two trades were made at $0.62 and $0.6250.  Blocks down $0.0450 at $1.67.  One trade was made at $1.66.   Barrels unchanged at $1.44.  Butter up $0.0225 at $1.7225.  Three trades were made ranging from $1.70 to $1.7225. Nonfat dry milk unchanged at $1.15.  Two trades were made at that price.

The T.C. Jacoby Weekly Market Report Week Ending March 19, 2021

The United States dairy herd continues to expand, driving milk production upward. According to USDA’s Milk Production report, released Thursday, producers added another 3,000 head of cattle between January and February, pushing the national herd up to 9.458 million cows, the largest herd size in decades. The growing herd drove a 2% increase in milk production in February, after accounting for the leap day. Totaling 17.63 billion pounds, February milk production was the strongest ever recorded for that month after considering leap days. USDA also revised January milk production growth up to 2.4% from the 1.6% published in last month’s report. Milk production has been growing for nine consecutive months, following the sudden decline that occurred at the beginning of the pandemic.

Milk production was particularly pronounced in the upper Midwest where relatively mild temperatures during most of the month helped to accelerate gains in milk yields. California milk production also grew by 2.1% during the month and USDA revised the state’s surprising January loss of 0.7% printed in last month’s report to a gain of 2%. Perhaps most shocking, however, was that despite the devastation brought about by winter storm Uri, Texas and New Mexico still managed to post year over year production increases of 5.3% and 1%, respectively, in February. It is likely that that the full effects of the storm will show up in future reports as culling in those geographies increased and dumped milk, while captured in the milk production figures, never made its way into finished products.

In any case, milk is undeniably long and with the spring flush imminent in most parts of the country, supplies are expected to remain plentiful. Yet even as milk remains abundant, demand has also perked up, helping to keep markets in balance. Bottlers in several areas of the country are reporting improved demand, even as educational institutions head into spring break. The foodservice sector has also begun to improve and retail demand for dairy products, has remained robust as spring holidays near. Dairy product manufacturers report that their schedules remain busy as they attempt to clear spot loads of milk and satisfy customer demands.

With the Easter holiday and other spring celebrations rapidly approaching, butter churns have been gearing up to meet demand. Butter manufacturers report that domestic demand has been healthy from both retail and foodservice outlets while international interest has remained robust. Cream supplies have tightened considerably in the Central and Eastern United States, but the arrival of the spring flush should ease tension on cream markets. CME spot butter prices were rather quiet for most of the week. On Friday, however, spot prices gave up 4.5¢ to ultimately close the week down a nickel at $1.665/lb., the lowest price since the trading of new crop butter began at the beginning of the month.

Even after rising by quarter cent on Monday, the nonfat dry milk (NDM) spot market also ceded some ground over the course of the week, giving up a total of 1.75¢ versus last Friday to end the week at $1.1525/lb. Despite the losses seen in Chicago, market participants surveyed by Dairy Market News report that the market feels poised to move higher. Export demand, particularly from Mexico has purportedly improved dramatically and parts of the country are reporting that spot loads of condensed skim are less available. Class IV milk futures were generally quiet though they gave up some ground later in the week as the spot butter and NDM markets saw prices retreat.

In many parts of the country, improved foodservice activity has translated to increased demand for cheese. While most manufacturers report that activity remains understated relative to pre pandemic levels, demand has markedly improved compared to several weeks ago. The CME block market rose by a penny on Monday and fell by a penny on Friday, ending the week unchanged from last Friday at $1.79/lb. Barrels, however, gave up a dime over the course of the week, falling to $1.4525/lb. on Friday with a total of 13 loads trading hands. The block-barrel spread has now grown to 33.75¢, the largest gap since last November.

Meanwhile the spot whey market continued to reach new heights, setting another record this week and gaining ground every day but Friday when it remained unchanged. Closing Friday’s trading session at 61.25¢/lb. dry whey prices were up 2¢ compared to last Friday and have once again hit levels not seen since the market was created in 2018. Strong demand from both domestic and international sources for a variety of products across the whey complex continues to drive the prices higher. Despite they whey market’s sustained rally, weakness in the cheese market weighed on the Class III milk futures markets during most of the week. Nearby contracts gave up value on nearly every day, with APR21, MAY21, and JUN21 each falling by at least 30¢ over the course of the week.

After being unimpressed by last week’s USDA WASDE report, the grain markets were fickle this week. Grain futures rose and fell on announcements of export commitments and shifts in other markets such as the crude market. Corn futures moved up on Tuesday and Wednesday, fell on Thursday then gained some ground on Friday as additional sales to China were announced. Soybean futures retreated on Wednesday and Thursday before finding their footing on Friday. Nevertheless, grain prices remain elevated while the market anxiously anticipates the release of USDA’s Prospective Plantings report, scheduled for publication on March 31.

Source: Jacoby

On the Chicago Mercantile Exchange milk futures continued lower Tuesday following the bearish cold storage report. April Class III futures have decreased steadily across the last 8 trading days, giving back roughly $1.50/cwt.  May milk lost a dime to $17.48/cwt.  June was down 1 to $17.67/cwt.  Class IV milk moved slightly higher. 

The CME Cash Dairy Product Trade continues to trade relatively quiet.  Dry whey unchanged at $0.6125.  Blocks down $0.0450 at $1.7150.  One trade was made at that price.   Barrels up $0.0025 at $1.44.  Butter up $0.0350 at $1.70.  One trade was made at that price. Nonfat dry milk up $0.01 at $1.15.  One trade was made at that price.

Soybeans moved higher on initial strength out of the Soy Oil market, before giving back some of the early gains.  May soybeans finished 5.75 cents higher to $14.2325/bushel.  May corn traded both sides of $5.50/bushel before settling at $5.5125.  May soybean meal rose $2.20 to $398.80/ton.

On the Chicago Mercantile Exchange milk futures carried its negative tone through to another week along with the cash market.  Class III milk struggled to find momentum higher. March fell 1 cent to $16.24, April fell 20 cents to $16.82, and May fell 22 cents to $17.56. The balance of 2021 was down 2-21 cents. Class IV milk was unchanged in March at $14.30, April at $14.76 and May fell 7 cents to $15.06/cwt. The balance of the year was unchanged to 10 cents lower.

The CME spot trade was relatively quiet with dry whey unchanged at $0.6125.  Blocks down $0.03 at $1.76.   Barrels down $0.0150 at $1.4375.  Two trades were made at $1.4375 and $1.45. Butter unchanged at $1.6650.  One trade was made at that price. Nonfat dry milk down $0.0125 at $1.14.  One trade was made at that price.

The USDA says dairy stocks continue to build during the month with butter stocks seeing some decline in their rate of gain. Cheese stocks during February totaled more than 1.4 billion pounds, up five percent from 2020 and up two percent on the month. Butter inventories were up six percent from the previous month and up 17 percent higher than last year at more than 352 million pounds.

On the Chicago Mercantile Exchange milk futures continued lower following the direction of cash trade Thursday. March Class III milk down nine cents at $16.26.  April down seven cents at $17.34.  May three cents lower at $17.90.  June unchanged at $18.00.  July through September contracts four cents lower to four cents higher.

On the spot market dry whey up $0.0075 at $0.6125.  One trade was made at that price.  Blocks unchanged at $1.80.   Barrels down $0.0250 at $1.49.  Four trades were made ranging from $1.49 to $1.4950. Butter unchanged at $1.71.  Nonfat dry milk down $0.0050 at $1.1650.  Two trades were made at $1.1650 and $1.1675.

On the Chicago Mercantile Exchange negative global markets continue to weigh on milk futures with prices lower at midweek.   Class III milk was unchanged in March at $16.35, April fell 1 cent to $17.41, and May fell 12 cents to $17.03/cwt.  Class IV milk was unchanaged nearby but fell in the summer and fall contracts. March held at $14.36, April at $15.07, and May at $15.45. The balance of 2021 was 1-13 cents lower with an average at $16.55/cwt. 

The CME spot trade had dry whey up $0.0075 at $0.6050.  One trade was made at that price.  Blocks unchanged at $1.80.  Four trades were made ranging from $1.76 to $1.80. Barrels down $0.0275 at $1.5150.  One sale was made at that price. Butter unchanged at $1.71.  Nonfat dry milk down $0.0025 at $1.17.  Five trades were made at $1.17 and $1.18.

The Global Dairy Trade index in New Zealand posted its first decline since the beginning of November, down 3.8 percent, follow the last event’s double-digit rally.  Whole milk powder had the greatest decline, down 6.2 percent, followed by butter, down 2.8 percent.  Lactose had the largest gain, up 8.6 percent, followed by anhydrous milk fat, up 3.7 percent, posting the largest increases.

«This GDT Event was always going to be a test for the market, given how prices spiked in the first week of March,» said Emma Higgens, senior dairy analyst at Rabobank.

She said there was more product on offer to buyers in this auction compared to two weeks ago, with more than 20 percent whole milk powder for sale and 4 percent skim milk powder available.

«The additional GDT volumes were significant and so for average whole milk powder prices to remain above the US$4000 mark is a really good result, as too was the (small) price gains for skim milk powder,» Higgens said.

Higgens said given global supply and demand dynamics, a strong milk price was still forecast.

«At a broad level, we think that the expensive cost of producing milk (and whole milk powder) in China, overlaid with the complexity of global shipping disruptions, alongside modest global milk production growth lends itself to elevated whole milk powder prices over the coming months.»

On the Chicago Mercantile Exchange milk futures continued their mostly lower trade Tuesday following negative global markets while cash markets were mixed. Class III milk slipped lower on very low volumes. March gained a penny to $16.35, but April’s fell 10 cents to $17.42, and May fell 13 cents to $18.05/cwt. Class IV was unchanged across the board – March at $14.36, April at $15.07, and May at $15.45/cwt.

It was a snoozer of a Tuesday across the commodity spectrum. Dry whey up $0.0025 at $0.5975.  Blocks unchanged at $1.80.  Barrels up $0.0025 at $1.5425.  One sale was made at that price. Butter down $0.0050 at $1.71.  Two trades were made at $1.69 and $1.71.  Nonfat dry milk unchanged at $1.1725.  Three trades were made at $1.17 and $1.1725.

The Feed and Grain complex saw corn gain 4 ¾ cents to 5.54 ¼, Soybeans gained 3 ¾ cents to 14.23 ¼, and Soybean meal fell $1.30 to $406.10/ton.

On the Chicago Mercantile Exchange milk futures started Monday to the lower side while cash trade was mostly higher. Q2 2021 Class III futures lost 13 cents on average Monday and offers $17.95/cwt.  2nd half months ranged from 10 cents lower to 15 higher with a $18.30/cwt average.  2022 early months were up modestly as well.  Class IV witnessed some trade in the 2nd half of 2021 and prices were up 3-10 cents in most months.

Mixed results in the CME spot as blocks where up $0.01 at $1.80.  Two sales were made at $1.8075 and $1.81.  Barrels where down $0.0125 at $1.54.  Two sales were made at $1.5525 and $1.5575. Butter unchanged at $1.7150.  Nonfat dry milk up $0.0025 at $1.1725.  Dry whey up $0.0025 at $0.5950. 

Grain prices printed green across the board Monday.  Old crop corn rose 9-10 cents/bu while new crop was unchanged.  Soybeans saw similar trade as old crop added 6-7 cents and new crop was up a quarter cent.  Soybean meal tacked on $5-6/ton out through August 2021.  The wheat complex ranged from 3-5 cents/bu stronger.  Monday marked the first day of expanded position limits on the grains as well.  This will allow traders to add significantly more long or short positions to their bet over time and likely volatility as well.

On the Chicago Mercantile Exchange milk futures turned higher Thursday supported by positive cash cheese trade and optimism following additional COVID aid. March Class III milk nine cents higher at $16.37.  April up 23 cents at $18.09.  May 15 cents higher at $18.48.  June up a nickel at $18.30.  July through September contracts a nickel to a dime higher.

On spot trade blocks up $0.0450 at $1.7950.  Barrels up $0.05 at $1.55.  One sale was made at that price.  Butter down $0.0050 at $1.7050.  Two trades were made at $1.68 and $1.6825. Nonfat dry milk down $0.01 at $1.1625. Dry whey unchanged at $0.5925. 

It’s predicted the impact of wide vaccination should be felt mid-year in higher economic activity, as we see a return to familiar consumer patterns.

On the Chicago Mercantile Exchange milk futures closed lower Wednesday as declining cash cheese trade from the week caught up with futures. The Class III milk market has seen quietness as of late.  March fell 13 cents to $16.27, April through December lost 3-10 cents for a 50-cent range of $17.85-$18.35/cwt.  Class IV milk saw little volume trade hands.

On the spot market, butter continues its rebound higher, up $0.03 at $1.71.  Four trades were made ranging from $1.69 to $1.71. Nonfat dry milk down $0.0025 at $1.1725.  Two sales were made at $1.1725 and $1.1750.   Dry whey down $0.0025 at $0.5925.  One sale was made at that price.  Blocks unchanged at $1.75.  Barrels unchanged at $1.50. 

Grain Markets bled red to follow up yesterday’s mild WASDE report.  December corn lost 4.50 cents to $4.8025/bushel.  November soybeans tumbled 23.25 cents to $12.3875.  March soybean meal gave up 9.10 to $410.10/ton.  September Chicago Wheat dropped 4.75 cents to $6.5350/bushel.

The T.C. Jacoby Weekly Market Report Week Ending March 5, 2021

With a sense of normalcy restored, and the spring flush rapidly approaching, milk is still plentiful and has resulted in copious dairy product production.

If there were any doubts about China’s appetite for dairy products, these were put to rest on Tuesday with an eye-popping result at the day’s Global Dairy Trade (GDT) auction. Driven principally by aggressive bids from Chinese buyers, the GDT index soared by 15.0% – the eighth consecutive increase and the largest gain in a single session since September 2015. Whole milk powder saw the largest increase, with prices galloping upward by 21.0% versus the prior event. Seemingly insatiable demand for fats pulled the price for anhydrous milkfat and butter up by 7.4% and 13.7%, respectively. Even with gains at the CME this week, spot butter in the U.S. maintains nearly a 90¢ discount to the GDT price after adjusting for fat content.
Back in the United States, many of the complications caused by February’s inclement weather have largely been overcome, with manufacturers and haulers reporting that a sense of balance has nearly been achieved. Though more accurate figures will continue to surface in the coming weeks, USDA’s Dairy Market News quotes that estimates of the milk lost during the cold spell may be as high as millions of pounds. However, with a sense of normalcy restored, and the spring flush rapidly approaching, milk is still plentiful. Abundant milk has resulted in copious dairy product production as seen in USDA’s Dairy Products report released on Thursday.

According to the Dairy Products report, a total of 1.117 billion pounds of cheese was produced in January, the largest amount ever for the month and an increase of 0.5% year-over-year. Manufacturers continued to opt for products that could be used in ageing programs, pushing the production of American style cheeses, and especially Cheddar, upward. January output of Cheddar cheese jumped by 5.7% year-year over year to 337.6 million pounds while Mozzarella production slipped by 1.9% versus January 2020.

Robust cheese production has persisted into recent weeks as manufacturers continue to report busy production schedules. Spot milk remains readily available, and manufacturers can pick up these loads at comparable discounts to those seen in recent weeks. Nevertheless, some cues may be emerging that the market is firming. Domestic demand appears to be improving as Covid-19 restrictions are rolled back and vaccination campaigns progress. This cautious optimism likely helped to support gains at the CME this week as spot Cheddar blocks saw prices move steadily upward over the course of the week. By Friday spot Cheddar blocks reached $1.7325/lb. an increase of 11.5¢ versus last week. Barrels began the week unchanged before finding some traction on Thursday and Friday, adding 8.75¢ over the week to close Friday’s session at $1.5075/lb.

If cheese vats were busy in January, the butter churns were even more so. Butter production for the month increased by 7.0% year-over-year to 206.9 million pounds – record production for the month of January. Butter exports were also strong during the month, rising by 81.9% year-over-year to 6.2 million pounds. In the first week of trading for new crop butter, and emboldened by the aggressive GDT result, spot butter prices bounded upward early in the week, adding 24.5¢ between Monday and Tuesday to reach $1.715/lb. on Tuesday, the highest price since July. The price was coaxed down on Wednesday and Thursday before rebounding on Friday, ultimately ending the week at $1.69/lb. Even as the spot butter price ended this week 22¢ higher than prior week, it nevertheless maintains a significant discount to global competitors.

Ample butter production resulted in lots of condensed skim for dryers in January as production of nonfat dry milk (NDM) also set a January record of 196.9 million pounds, an increase of 11.7% compared to the same month prior year. Despite sustained international interest, skim milk powder production declined 8.0% year-over-year to 36.9 million pounds during the month. Demand has been active from both domestic and international sources which has helped to put modest upward pressure on prices. Despite a dip during Wednesday’s trade, spot NDM prices moved up 1716 Hidden Creek Court P 314.821.4456 E info@jacoby.com Suite 200, St. Louis MO 63131 over most of the week, finishing Friday’s session at $1.1775/lb., an increase of 4.5¢ versus last week with 33 loads trading hands.

Continuing the trend seen over the last few weeks, whey markets once again belonged to the bulls as spot prices moved up to 58¢/lb. on Thursday, the highest price ever since the spot market began trading in 2018. Even though cheese production is active, a preference for the production of whey permeate, whey protein concentrates (WPC), and whey protein isolates has limited the availability of dry whey. USDA’s Dairy Products report showed that in January while dry whey production for both human and animal use slipped by 0.4% year-over-year, output of WPC and WPI increased by 6.6% and 11.8%, respectively. Export demand also continues to surge with January whey exports rising 34.4% year-over-year to 40.3 million pounds, anchored by strong demand from Southeast Asia.

Milk futures rode the spot market gains, moving upwards during the week. Class III milk futures found the most traction on Tuesday and Wednesday before most nearby contracts retreated slightly on Thursday and Friday. Nevertheless, the MAY21 through NOV21 Class III contracts settled on Friday above $18/cwt. Nearby Class IV contracts also moved upward, buoyed by the spot butter and GDT rally early in the week.

High feed costs continue to cast a shadow over dairy producer profitability. Dairy ration costs as calculated by the Dairy Margin Coverage program rocketed up to $10.36/cwt. in January, an increase of 64¢/cwt. versus December and the highest value since the program calculations began to be published in 2019. Rising corn and soybean prices are the culprit for the increase. In USDA’s Agricultural Prices report, released last week, corn and soybean prices were raised to $4.24/bu. and $10.90/bu., respectively, the highest prices for these commodities since 2014.

Source: Jacoby

On the Chicago Mercantile Exchange  milk futures closed higher Tuesday supported by a bullish supply and demand report while cash trade was mixed. Class III market values responded to today’s product trade in a way that the market has become accustomed to.  Low volumes as April traded less than 200 times.  The only other contract to even clear 100 contracts was May.  April added 14 cents/cwt to $17.89 while May 2021 through March 2022 ranged from 8 cents lower to 6 cents higher.  The 2nd quarter 2021 average settled Tuesday at $18.10/cwt while the second half was at $18.24/cwt, respectively.  Class IV markets were up as well in the months that traded anywhere from 4-20 cents/cwt.

The CME spot dairy auction ended Tuesday’s session in a slightly negative manner. Barrels down $0.0075 at $1.50.  One sale was made at that price.  Butter down $0.0125 at $1.68.  Two trades were made at $1.68 and $1.6825. Nonfat dry milk down $0.0025 at $1.1750.  One sale was made at that price.  Dry whey unchanged at $0.5950.  Blocks up $0.0175 at $1.75.  

On the Chicago Mercantile Exchange milk futures started Monday higher supported prerecord positioning ahead of this week’s supply and demand report.  Class III milk moved 5 cents higher in March at $16.35, April gained 11 cents to $17.75, May gained 13 cents to $18.27. Second half of 2021 was 10-15 cents higher and is averaging $18.24/cwt. Class IV lost some steam. March was unchanged at $14.32, April fell 13 cents to $15.09, May fell 8 cents to $15.58/cwt. Balance of 2021 was unchanged to 4 cents lower. Averaging at $16.62/cwt.

The CME spot trade was a bit of a sleeper.  Dry whey up $0.0150 at $0.5950.  Blocks unchanged at $1.7325.  Barrels unchanged at $1.5075.  Butter up $0.0025 at $1.6925.  Five trades were made ranging from $1.6725 to $1.6925. Nonfat dry milk unchanged at $1.1775.  One sale was made at $1.1750. 

The FAO Dairy Price Index averaged 113.0 points in February, up 1.9 points (1.7 percent) from January, rising for the ninth consecutive month and nearing a 40-month high. In February, international price quotations for butter rose, underpinned by firm imports by China amidst limited export supplies from Western Europe due to a surge in internal demand in view of the upcoming Spring holidays. Quotations for whole milk powder (WMP) increased due to high import purchases and concerns over potentially lower export supplies in New Zealand stemming from dry weather conditions. Skim milk powder prices also increased, reflecting low stocks and tight export availabilities in Europe. By contrast, reduced demand for spot supplies, coupled with high inventories in the United States of America, weighed on cheese quotations.

Source: FOA

On the Chicago Mercantile Exchange milk futures turned lower ahead of USDA’s Thursday dairy production report while cash was mostly higher. March Class III milk down 18 cents at $16.22.  April down 25 cents at $17.69.  May six cents lower at $18.09.  June down three cents at $18.16.  July through September contracts five cents lower to two cents higher.

On spot trade dry whey up $0.0150 at $0.58.  Two sales were made at $0.575. and $0.58.   Blocks up $0.04 at $1.69.  Two sales were made at $1.67 and $1.69. Barrels up $0.0450 at $1.4650.  Three trades were made ranging from $1.45 to $1.46.  Butter down $0.0125 at $1.6775.  Seven trades were made ranging from $1.6650 to $1.6775. Nonfat dry milk up $0.050 at $1.1775.  Two trades were made at $1.1775 and $1.18.

On the Chicago Mercantile Exchange milk futures  closed Wednesday higher as optimism from Tuesday’s global trade carried over into markets. The dairy markets were quieter after Tuesday’s fireworks.  March Class III milk up six cents at $16.40.  April up 14 cents at $17.94.  May 16 cents higher at $18.15.  June up 19 cents at $18.19.  July through September contracts nine cents higher.

This followed a CME Spot market that butter down $0.0250 at $1.69.  Seventeen trades were made ranging from $1.6775 to $1.70. Nonfat dry milk down $0.0025 at $1.1750.  Three trades were made at $1.1725 and $1.1750. Dry whey unchanged at $0.5650.   Blocks up $0.02 at $1.65.  One sale was made at $1.6125. Barrels unchanged at $1.42. 

The Global Dairy Trade index in New Zealand saw an impressive 15 percent gain Tuesday likely tied to China demand and stockpiling amid shipping container shortages. Butter and Whole Milk Powder led the charge.  Butter saw gains of 13.7% on aggregate to settle at $2.59/lb (US equivalent adjusted to 80% fat).  This represents the highest price since October of 2017.  Fonterra cheddar prices climbed 1.3% to $1.94/lb on US equivalent.  This is the highest price since May.

NZX senior dairy analyst Amy Castleton said this was definitely a higher result than anyone expected. Some analysts were predicting a lift, but only of 3 to 4 percent.

She said it had been a hotly contested auction, lasting almost three hours, with just 86 winning bidders over 23 rounds.

There was strong demand out of North Asia with increased buying compared to the same time last year.

Purchasers were generally buying up as there was a need for product to deal with Covid-19 related shipping delays, Castleton said.

Rabobank dairy analyst, Emma Higgins, said the GDT result was definitely all about Chinese demand.

“The cost of producing milk in China right now is expensive. Feed prices in China – particularly for corn and soymeal – have hit multi-year highs.”

Higgins said freight and customs delays due to Covid-19 and China’s continued interest in increasing food safety stocks made the scramble for dairy product somewhat understandable.

New Zealand was moving towards the end of the dairy production and sale season, she said, which meant the result at GDT would have less of an influence on the milk price.

It was still a posibility that Fonterra may revise up its forecast payout range when it provided a financial update later this month, she said.

Farmers astounded but cautious

West Otago dairy farmer Bruce Eades said this was not what he expected to wake up to.

“I sort of looked at it and had to take a double take and rub my eyes because I was still half asleep – a 15 and 21 percent jump, would never have picked anything like that,” Eades said.

Eades said he was astounded by the results, and they gave some confidence, but he did not want to get ahead of himself as it could flip at the next auction.

“Everyone’s probably just in a bit of disbelief and probably a bit nervous now thinking, you know, ‘is it going to drop by 25 at the next one’. It’s such an anomaly that everyone’s a little bit starstruck really,” he said.

However, Eades said after such a large rise, a drop in prices at the next auction would likely still leave farmers in a good position.

Marlborough farmer Corrigan Sowman said while it was a good result he would not be rushing out to buy a new tractor or ute just yet.

“I have to admit I almost fell off my seat, literally, when I read it this morning. So it’s good, but I think you’ve just got to put it in the context that it’s one auction of a number, so it’s an indication of buyer behaviour in the last fortnight and sentiment, not of a season. The interesting thing is that there’s always sort of a readjustment period after these … so what’s that going to look like? That always makes me a bit nervous,” Sowman said.

He said it could be a while before farmers saw the benefits of the jump.

“It could be six, 12, 18 months away that you actually see the cash results of these things… it just continues to support good fundamentals for dairy in New Zealand,” Sowman said.

The main dairy companies have recently narrowed their forecast payouts to farmers for the current season to above $7 per kilogram of milk solids.

Last month Fonterra lifted its forecast farmgate milk price range to between $6.90 and $7.50 per kilogram of milk solids.

On the Chicago Mercantile Exchange milk futures closed Tuesday higher supported by double-digit gains in global trade and strong cash trade. Class IV milk has awakened to start the month of March.  March exploded with a 62-cent gain to $14.90/cwt.  April gained 12 cents to $15.13/cwt.  Second half 2021 average jumped to $16.75/cwt.  Class III milk was also impressive with several months breaking through $18/cwt.  Second half 2021 average is $18.04/cwt. 

The CME Cash Dairy Product Trade dry whey up $0.0075 at $0.5650.  Two sales were made at $0.56 and $0.5650. Blocks up $0.0050 at $1.63.  Two sales were made at $1.6225 and $1.63. Butter up $0.08 at $1.7150.  Four trades were made ranging from $1.65 to $1.71. Nonfat dry milk up $0.0325 at $1.1750.  Twelve trades were made ranging from $1.16 to $1.1750. Barrels unchanged at $1.42. 

On the Chicago Mercantile Exchange milk futures closed Monday mostly lower while trying to find a new trading range, butter saw strong support. Class III values began Monday’s session in double digit negative territory but managed to dig out of that hole and close just a nickel lower March through July 2021 while August through December was even to a dime higher.  The second half 2021 average is now offering dairy producers a $17.95/cwt average and even touched $18.00.  Class IV markets rose following butter’s impressive move but only a modest 15 – 25 cents/cwt.

The CME spot dairy auction turned in an even to stronger session to kick off this week.   Butter up $0.1650 at $1.6350.  Three trades were made ranging from $1.63 to $1.65. Blocks up $0.0075 at $1.6250.  Four sales were made ranging from $1.6175 to $1.6250. Nonfat dry milk up $0.01 at $1.1425.  Sixteen trades were made at $1.1350 to $1.1425. Dry whey unchanged at $0.5575.  One sale was made at that price. Barrels unchanged at $1.42.  One sale was made at that price.

Grain values ended Monday in a sea of red following a mainly higher overnight session.  Corn lost 8 cents on the front end while new crop was down 2 cents.  Soybeans weakened 12-13 cents/bu while meal was off $3/ton.  The wheat complex fell 5-11 cents/bu.

On the Chicago Mercantile Exchange milk futures continued to rally Thursday supported by strong cash trade. February Class III milk up six cents at $15.65.  March up 53 cents at $16.56.  April 75 cents higher at $17.40.  May 57 cents higher at $17.82.  June through August contracts 23 to 28 cents higher.

On the spot market blocks up $0.07 at $1.66.  Eleven trades were made ranging from $1.60 to $1.66. Barrels up $0.0650 at $1.4475.  Three trades were made at that price.  Butter up $0.0325 at $1.4975.  Two trades were made at $1.4750 and $1.4950. Nonfat dry milk up $0.0275 at $1.1225.  Eight trades were made ranging from $1.1075 to $1.1225. Dry whey up $0.0025 at $0.5475.  One sale was made at that price

On the Chicago Mercantile Exchange milk futures turned higher Wednesday correcting oversold positions and supported somewhat by improving cash trade. February gained 1 penny to $15.65 per cwt.  March added 22 cents to $16.08 per cwt.  April jumped 29 cents to $16.74.  Second half remains well supported at $17.36-$17.89. Class IV futures moved lower.

On CME Cash Dairy Product Trade dry whey down $0.0025 at $0.5450.  Blocks up $0.02 at $1.59.  One sale was made at that price. Barrels unchanged at $1.3825.  Butter down $0.0225 at $1.4650.  One sale was made at that price. Nonfat dry milk up $0.0050 at $1.0950.  One sale was made at that price.

Grains soared higher on the heels of soybeans.  May soybeans settled at $14.2575.  The contract high was set at $14.33 per bushel a couple weeks back.  May corn saw a 4.50 cent bounce to $5.57 per bushel.  Both new crop corn and soybeans achieved new contract highs.  March soybean meal finished $1.80 to $428.30 per ton.  May Chicago Wheat rallied 15.75 cents to $6.8550 per bushel. 

The role of emerging technological trends that can help dairy farmers better manage their operations and improve animal health, longevity and nutrition was a focus of a panel discussion that also looked at impacts and lessons from the pandemic.

Three dairy experts shared their views during a webinar at the World Ag Expo, which went virtual this month due to COVID-19.

With the pandemic increasing market volatility, Fernanda Ferreira, a specialist in herd health and management at the University of California, Davis, said she thinks dairy farmers have learned they need to be prepared for so-called “black swan” events. Even though overall U.S. dairy consumption has reached its highest level, she said, dairy farmers need to determine how to manage supply and operate in volatile markets. For California, which exports 18% to 20% of its milk production, it remains unclear how these relationships will affect markets in 2021, she added.

One takeaway from the pandemic has been the use of risk-management tools, said Michael Hutjens, professor of animal science at the University of Illinois, noting that dairy farmers have been locking in milk and feed prices, especially with the recent rise in feed costs.

The pandemic has also increased focus on ways to lower production cost and boost efficiency. One way to do that is to improve feed intake, which helps milk production, said Tom Oelberg, a ruminant specialist for Diamond V, an animal nutrition company based in Iowa. He stressed the importance of maintaining consistent feeding times, including when feed is dropped off and pushed up, so cows can have continuous access to feed. Having employees available to do this at all hours can be a challenge, he acknowledged. Some larger dairies use robots, he said, but they’re “not quite as effective.”

Robots can reduce the need for labor, but Ferreira said that may not be the main reason producers adopt the technology—at least according to those she’s asked. She said she was surprised to hear that some of them are choosing robotics to improve cow welfare and to keep their children on the farm.

“I think it’s a trend,” Ferreira said. “I don’t know how fast that’s going to happen, but it’s happening.”

Hutjens encouraged the use of rumen modeling to help optimize diets, fine-tune rations and improve precision feeding.

“It’s just amazing what this technology does for metabolizable protein, bioavailability of micronutrients, dry matter adjustments,” he said.

Another technology being used is cameras in barns to monitor feed intake and cow behavior, which Oelberg said will help dairy farmers better evaluate and design facilities to maximize cow comfort.

Cameras are also being used for body condition scoring, lameness scoring and to monitor weight changes, Hutjens said. Rather than “standing in the barn for hours and hours” trying to collect this data, he said this information can be captured and summarized via cameras.

Hutjens made the point that cows are still individual animals, but “how do you get your arms around 3,000 cows unless you have some type of assistance? And, of course, that’s where the technology and the cameras are going to come into play,” he said.

Managing all this data will be key, Oelberg said, as it will help producers make quicker decisions about their dairies. Heat mapping and cow comfort index, for example, can tell producers which pens are having an issue, what day of the month and in which barns.

“Within a few seconds, the dairyman can take a look at this picture and decide what’s going on and take appropriate action,” he said.

Ferreira said technology can also help producers be more precise about the medications they give their animals. One area she said she’s working on is predicting which cows need antibiotics, noting that with some illnesses, cattle can self-cure.

“So how can we go from dealing with a big population (of dairy cows) … and go into these specifics? I think technology is great for that,” she said.

Because dairy cows produce more milk after the first lactation, Oelberg said producers are looking at ways to extend the productive life of cows, noting that the most profitable animals are those in their second, third and fourth lactations. Hutjens pointed out that a more-mature cow can produce 20 pounds more milk per day than a first-lactation cow.

“It takes the first lactation for the heifer to recover her replacement costs,” Oelberg said. “I think people are going to start looking at those older animals as our real moneymakers.”

There’s promising research being done in California on feed additives that can reduce methane emissions in dairy cows, Ferreira said.

Because of the additional cost of feed additives, Oelberg said research will be key to help dairy farmers understand what those additives do and what will be their return on investment.

Hutjens said farmers are also looking to different feed crops that will reduce their water use, noting the renewed interest in sorghum as an alternative to corn, because its uses about a third less water.

Source: agalert.com

The T.C. Jacoby Weekly Market Report Week Ending February 19, 2021

Though it will take some time for the impacts of the weather to become fully appreciated, a reduction in milk production and increase in culling is likely in the coming weeks.

With nearly three quarters of the United States blanketed by snow, weather has become a major protagonist in the dairy markets this week, wreaking havoc across the supply chain. Uncharacteristically cold weather has been a particular issue in Texas and eastern New Mexico where producers have been scrambling to protect their herds from the frigid temperatures. Impassable roads and plant shutdowns have forced producers in some areas to dispose of milk on the farm. Though it will take some time for the impacts of the weather to become fully appreciated, a reduction in milk production and increase in culling is likely to be borne out in the coming weeks.

Of course, winter weather complications didn’t end at the farmgate. Several processing facilities in the area were forced to shut down as energy supplies were diverted toward heating residences and essential services. Of those that were still operational, many were forced to work with reduced staffing as employees were unable to get to work. While plants outside the affected areas have attempted to absorb the milk that would have been typically processed by these plants, it is likely that a significant amount of milk had to be dumped over the course of the week.

Despite these complications, cheese manufacturers in the Midwest report that the market for spot milk has tightened somewhat. During the past week spot milk could be obtained for up to $6.50 under Class III prices – still a bargain by historical standards but not as cheap as in recent weeks. Manufacturers across the United States report that cheese demand has improved. While retail demand still reigns supreme, foodservice orders have ticked up as more restaurants have begun to open. An increase in demand would be welcome news considering that at 1.105 billion pounds, commercial disappearance of cheese in December was the lowest for that month since 2016.

A short week didn’t translate to a shortage of action in the spot Cheddar markets. After a lethargic start, with blocks and barrels unchanged on Tuesday, both products began to slide. Blocks gave up 2.75¢ on Wednesday, followed by another 2¢ to hit a weekly low of $1.51/lb. on Thursday. Friday breathed a bit of life into blocks, pushing them up 2.75¢ to close the week at $1.5375/lb., 2¢ lower than last week. In an active week during which 26 loads traded hands, barrels moved continuously lower after Tuesday, ultimately ending the week at $1.4125/lb., 7.75¢ lower than last Friday.

As the March 1 deadline for selling old crop butter rapidly approaches, the butter market seems to have found some traction. Foodservice demand is still depressed, according to market participants, but retail sales remain robust. Commercial disappearance of butter was up a surprising 5.2% year over year in December. Meanwhile, a USDA Section 32 solicitation for purchases of about 15 million pounds of butter between April and June also likely bolstered market sentiment, even as the announcement was aligned with expectations.

The situation remains precarious, however, as cream is readily available, and spot loads have become even more plentiful as facilities affected by winter weather try to rehome supplies. Churns have been working hard and while some concerns persist about inventory build, healthy demand seems to be stemming many of these issues. The CME spot butter market moved up convincingly this week, adding 15.5¢ to end the week at $1.55/lb., the highest price since last September. Even with the spot market gains this week, U.S. butter remains a steal compared to international product. Another strong performance for butter and anhydrous milkfat at Tuesday’s Global Dairy Trade event lifted prices for these products even higher.

After opening Tuesday’s spot session with a .25¢ gain, nonfat dry milk prices slid over the balance of the week, ultimately closing Friday’s trade at $1.0925/lb. 17 loads traded hands during the week. Even though some powder manufacturers have been affected by the inclement weather, production has remained robust. A shortage of containers continues to garner headlines and is interrupting the ability of exporters to move product abroad, even where interest from global buyers exists.

The whey markets once again flexed their muscles this week, with spot prices rising to 55¢/lb. on Wednesday and Thursday before retreating slightly on Friday to close the week at 54.75¢/lb., up half a penny from last Friday. Demand is reportedly healthy from both domestic and international sources though logistical challenges, namely the shortage of containers, continues to challenge the ability to exporters to actually get product moved.

Class III milk futures were able to make some gains on Tuesday, even as the spot cheddar markets were quiet on the day. However, these gains were largely erased over the remainder of the week with most nearby contracts giving up ground as spot cheese prices slid. Class IV milk futures performed similarly with Tuesday’s gains subsequently canceled out by losses later in the week. Despite spot butter’s strength, most nearby Class IV contract settled on Friday within a few cents of prior week levels.

The grain futures markets were mixed during the week with nearby contracts losing value while contracts further out on the curve moved upward. Corn futures saw modest gains early in the week undone by losses on Thursday and Friday. Nevertheless, the MAY21 corn contract, finished Friday’s session at over a nickel higher than last Friday’s settlement. Grain prices remain significantly elevated and will continue to be a threat to producer profitability in the near term.

Original Report at: https://www.jacoby.com/market-report/weather-wreaks-havoc-in-the-dairy-markets-this-week/

On the Chicago Mercantile Exchange milk futures took a dive Tuesday pressured by lower cash trade and expectations for bearish USDA reports. Class III slid lower. February was up 3 cents to $15.64, March fell 50 cents to $15.86. Class IV milk was unchanged in February at $13.28 and fell 15 cents in March to $13.92 per cwt.

The CME spot trade had \barrels down $0.03 at $1.3825.  One sale was made at that price. Butter down $0.0225 at $1.4875.  Six trades were made ranging from $1.4475 to $1.4875.  Nonfat dry milk down $0.0075 at $1.09.  Two trades were at $1.09 and $1.0950.  Dry whey unchanged at $0.5475.  Blocks unchanged at $1.57.  Two sales were made at $1.57 and $1.5775.

On the Chicago Mercantile Exchange milk futures started the week slightly higher supported by improving cash cheese trade. February Class III milk unchanged at $15.61.  March up nine cents at $16.36.  April six cents higher at $16.82.  May eight cents higher at $17.30.  June through August contracts unchanged to six cents higher.

The CME spot dairy auction kicked off this week in a mixed fashion.   Blocks up $0.0325 at $1.57.  Two sales were made at $1.56 and $1.57. Barrels unchanged at $1.4125.  Butter down $0.04 at $1.51.  Nonfat dry milk down $0.0050 at $1.0975.  Two trades were at $1.0950 and $1.0975.  Dry whey unchanged at $0.5475. 

On the Chicago Mercantile Exchange milk futures closed lower Thursday again following the direction of the cash cheese market. A softer CME spot dairy auction led to a step back in milk price on Thursday.  February Class III milk a penny lower at $15.62.  March down 24 cents at $16.28.  April down 14 cents at $16.98.  May 12 cents lower at $17.35.  June through August contracts a dime lower to unchanged.

Spot trade saw blocks down $0.02 at $1.51.  One sale was made at that price. Barrels down $0.0150 at $1.4250.  Two trades were made at $1.4225 and $1.4250.  Butter unchanged at $1.4950.  Dry whey unchanged at $0.55. 

On the Chicago Mercantile Exchange milk futures closed lower Wednesday pressured by declines seen in the cash cheese market. February Class III milk a penny lower at $15.63.  March down 18 cents at $16.52.  April down 14 cents at $17.12.  May three cents lower at $17.47.  June through August contracts a penny lower to five cents higher.

On the CME spot trade,  dry whey up $0.0075 at $0.55.  Two sales were made at $0.5450 and $0.55.  Blocks down $0.0275 at $1.53.  Four trades were made at $1.53 and $1.5475.  Barrels were down $0.05 at $1.44.  Eleven trades were made at that price.  Butter up $0.04 at $1.4950.  Two trades were made at $1.4750 and $1.4925. Nonfat dry milk down $0.0050 at $1.11.  Four trades were made ranging from $1.1025 to $1.11. 

Inventories for most dairy products remain heavier than typical for this time of year. Nevertheless, the situation is evolving and tighter markets could be on the horizon.

Chinese New Year celebrations may be ushering in the Year of the Ox, but here in the U.S. dairy markets, the bears are still very much present. Milk remains plentiful and manufacturers are picking up heavily discounted spot loads. Meanwhile, inventories for most dairy products remain heavier than typical for this time of year and demand from the foodservice channel continues to limp along. Nevertheless, the situation is evolving, and some developments suggest that tighter markets could be on the horizon.

Though milk yields have exceeded expectations for much of this year, the frigid temperatures and winter precipitation that have set in across large swaths of the Central and Eastern United States are expected to undermine cow comfort and push down on production in these areas. Inclement weather has also complicated logistics as icy conditions threaten the movement of raw milk and finished products in some locations. In other regions, however, milk production continues to forge ahead. Particularly in the West and Southwest, output is increasing seasonally as spring approaches.

The government is poised to continue levying influence on the dairy markets in the coming months. On Thursday, the House of Representatives Agriculture Committee approved $16 billion worth of measures for the purpose of supporting American food and agriculture. Within the bill $4 billion could be used for additional purchases of agricultural goods, including dairy products. Though the bill pertains to the administration’s COVID relief package – and is thus subject to the passage of the broader legislation – cheese and class III futures nevertheless bounded upward on the news with some nearby contracts trading limit up.

Overall, the spot Cheddar markets had a relatively subdued week, as the reality of ample supply and lackluster restaurant demand continues to weigh on prices. Cheese manufacturers across the country emphasize the availability of spot milk and are running had to absorb as much of it as possible. Following last Friday’s rally, CME spot Cheddar blocks opened the week with a modest gain on Monday. The market then lost steam for the remainder of the week, and despite a bounce on Thursday, Cheddar blocks ultimately finished the week at $1.5575/lb., down 8.25¢ from last Friday. Barrels remained unchanged at $1.50/lb. for most of the week before giving up a penny on Friday to close at $1.49/lb. Barrel trade was active with 29 loads changing hands, while 16 loads of blocks moved.

Spot butter prices managed to find some traction this week. With the exception of a dip on Wednesday, CME spot butter prices moved up all week, closing Friday’s trade at $1.395/lb., up 12.75¢ from last week. Market participants indicate that lower prices have helped to generate additional demand, particularly from retailers. As U.S. prices continue to hold a significant discount to global competitors, interest from international buyers is growing, and where possible, manufacturers are adjusting to produce butter that meets international standards. Even with the uptick in demand, cream supplies remain available and with churns running hard, butter inventories are still heavy. Most participants expect the butter market to bounce after March 1, when the shift from old crop to new crop butter occurs.

Nonfat dry milk (NDM) markets were unsettled this week. Inventories are heavy but demand has remained robust from both domestic and international sources, thus helping to keep some tension in the market. Condensed skim for dryers can still easily be obtained but NDM manufacturers indicate that prices have increased modestly. Spot NDM prices lost .75¢ over the course of the week at the CME, ultimately closing at $1.1125/lb. with 16 loads trading hands.

The dry whey market continues to demonstrate resilience with prices moving upward on strong exports and a production preference for higher protein products like whey protein concentrates and whey protein isolates. U.S. whey exports hit a record high in 2020, up 23.4% year over year after considering the leap day, and with 38.9% of these exports destined for China. Exporters have reported that Asian demand for U.S. whey has slowed in recent weeks as the Chinese New Year approached, but demand is expected to rebound after the holiday. CME spot dry whey was able to add .75¢ during the week to close Friday’s session at 54.25¢/lb.

Class III milk futures were under pressure for most of the week as they embodied the weakness of the spot Cheddar block market. Thursday’s House Agriculture Committee announcement imbued the market with a bit of strength and pushed several nearby contracts limit up. However, the rally was short-lived, and by Friday’s settlements nearly all 2021 contracts corrected downward once again. Class IV milk futures remained quiet for most of the week.

In its World Agricultural Supply and Demand Estimates report released on Tuesday, USDA made no edits to U.S. production estimates for corn or soybeans. However, the agency did increase export estimates by 50 million bushels for corn and 20 million bushels for soybeans, resulting in lower ending stocks. If USDA’s current estimates come to fruition, ending stocks of corn and soybeans will be the lowest since the 2013/2014 marketing year. Corn futures fell modestly on the report while soybean futures moved upward.

The trade continues to closely track the South American situation where rainy weather has postponed the soybean harvest and thus delayed planting of the country’s second corn crop, known as the safrinha crop. If the delays continue, it could lead to a reduction in Brazil’s corn production estimates and put additional pressure on global corn supplies.

Source: Jacoby