On the Chicago Mercantile Exchange milk futures closed higher Tuesday finding strength from the cash market while prices on at the Global Dairy Trade were lower. Class III milk futures traded $0.17 higher in September and $0.36 in October. November 2020 through the end of 2021 closed in a range of $0.05 higher to $0.05 lower. Class IV months settled with September down $0.08 while October traded 132 times with its price up $0.10 to $13.97/cwt. November was also up slightly.
CME Spot Dairy Auction followed GDT with Blocks up $0.0050 at $1.8025. Six trades were made ranging from $1.7750 to $1.8025. Barrels up $0.0075 at $1.4450. Three trades were made ranging from $1.4450 to $1.4575. Butter down $0.0225 at $1.4650. Nineteen trades were made ranging from $1.4525 to $1.48. Nonfat dry milk up $0.0050 at $1.03. Two sales were made at $1.0250 and $1.03. Dry whey unchanged at $0.3350.
The Global Dairy Trade auction index in New Zealand posted another negative sales event. The index dropped one percent to $2,955 per ton. Gains in butter milk powder, +3.9%, skim milk powder, +1.8%, and lactose, +0.8%, were offset by losses in whole milk powder, -2%, butter, -1.2%, anhydrous milk fat, -0.5%, and cheddar, -0.4%.
Grains saw a lot of volatility in the overnight session but turned in a calm day session of trade. After USDA released the crop conditions report on Monday afternoon, the market fell $0.07/bu in corn and $0.11 in soybeans on the overnight. Crop conditions were reported where the trade expected them to be following a big surprise the week prior. Corn and soybeans battled back and posted stronger settlements to $3.58/bu and $9.55/bu, respectively. The wheat complex ran $0.06 – $0.115/bu higher as well.
Amul, Gujarat Cooperative Milk Marketing Federation (GCMMF), has become the first Indian dairy firm to make a place in the global top 20 list released by Rabobank, a Dutch multinational banking and financial services company. According to the list, Switzerland’s Nestle topped the list with a turnover of US $22.1 billion, followed by France’s Lactalis with US $ 21 billion turnover. Amul has achieved an annual turnover of $5.5 billion. “GCMMF (Amul) enters the Rabobank’s Global Top 20 Dairy Companies list for the first time at No.16,” Amul said in its tweet. It further added that this is a matter of pride for 36 lakh milk producers of Gujarat. 
U.S. milk production volumes had finished higher on a YOY basis over 61 consecutive months from Jan ’14 – Jan ‘19, reaching the longest period of consecutive growth on record, prior to declining by a total of 0.3% from Jul ’19 – Jul ’19. Milk production volumes rebounded throughout more recent months, however, finishing higher over 12 of the past 13 months through Jul ’20. The 12-month rolling average milk production growth rate reached a two year high throughout Jul ’20.
YOY increases in production on a percentage basis were led by South Dakota (+11.5%), followed by Indiana (+6.0%) and Colorado (+5.8%), while production volumes finished most significantly lower YOY on a percentage basis within Florida (-5.7%), New Mexico (-5.3%) and Vermont (-5.3%). Overall, 17 of the 24 states milk production figures are provided for experienced YOY increases in production throughout the month.
California milk production volumes increased on a YOY basis for the seventh consecutive month throughout Jul ’20, finishing up 0.5%. California accounted for 18.3% of total U.S. milk production volumes throughout the month, leading all states.
Eight of the top ten largest milk producing states experienced YOY increases in production throughout Jul ’20, as milk production within the top ten milk producing states increased by a weighted average of 1.2% throughout the month. The aforementioned states accounted for nearly three quarters of the total U.S. milk production experienced during Jul ’20. Production volumes outside of the top ten largest milk producing states increased 2.3% on a YOY basis throughout the month.
Jul ’20 YOY increases in milk production on an absolute basis were led by Texas, followed by Pennsylvania and Idaho, while YOY declines in production on an absolute basis were most significant throughout New Mexico.
The Jul ’20 U.S. milk cow herd rebounded 2,000 head from the six month low level experienced throughout the previous month. The U.S. milk cow herd currently stands at 9.352 million head, finishing 37,000 head above the previous year but remaining 86,000 head below the 23 year high level experienced during Jan ’18.
U.S. milk per cow yields finished 1.1% above previous year levels, rebounding to a four month high growth rate. The YOY increase in milk per cow yields was the 56th experienced throughout the past 57 months. Yields experienced throughout the Midwestern states of Wisconsin, Minnesota, Iowa and Illinois finished 2.4% higher on a YOY basis however yields experienced throughout the Western states of California, Idaho, Washington and Oregon declined 0.2% YOY, finishing lower for the second time in the past three months.
Month-over-month increases in milk cow herds experienced throughout Indiana, Michigan, Washington, Ohio and Utah more than offset MOM declines in the New Mexico, Oregon, Vermont and Florida milk cow herds during Jul ’20.
YOY increases in milk cow herds continued to be led by Texas, followed by Idaho and South Dakota, while Wisconsin experienced the largest YOY decline in their milk cow herds throughout the month.
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Growing demand for dairy in China has resulted in higher global dairy prices. There were significant price increases in July. The Global Dairy Trade (GDT) price index jumped early in the month by 8.3%, the biggest jump since November 2016.
While there is still a high level of uncertainty in our global markets, we do see a lowering level of risk and this supports a decision to lift the bottom end of the price range.
In an environment as fickle as the Chicago Mercantile Exchange, bulls are not typically bred for their stamina. They tend to charge and then pause to catch their breath before attempting another run, and they are not ashamed to retreat to the shade from time to time. But in the Cheddar block market – currently the greenest pasture in the commodity world – there is a bull of a different breed. He is relentless, charging straight uphill with no signs of fatigue. This week the block market leapt from one record to the next, finally resting at an alltime high of $2.915 per pound, up 24ȼ from last week’s already lofty value. The barrels were less energetic. They fell 7.5ȼ this week to a still-lofty $2.34.
Butter production has slowed as cream heads to other uses, particularly ice cream. Butter demand continues to suffer from the pronounced slowdown in the restaurant and foodservice industry. This week, CME spot butter fell 4.75ȼ to $1.69.
Class III futures followed Cheddar blocks higher. The July contract rallied $1.23 to $24.20, within shouting distance of the alltime high of $24.40, set in October 2014. August Class III soared $2.09 to $23.04. Over the past month, the August contract has added more than $6 per cwt., a staggering increase. Deferred Class III futures posted double-digit gains. Class IV futures settled in the red, with 30ȼ to 40ȼ losses on the front of the board. Sky-high Class III values are likely encouraging dairy producers to add as much milk as they can, but the heat may stymie their efforts.
