Healthy School Lunch Themed Image. Milk Money.
Columnist Lee Mielke wraps up the week’s dairy news.
CME block Cheddar got up to $1.75 per pound Tuesday but relapsed and closed the first Friday of September at $1.6950 per pound, down a half-cent on the week and 65 1/2-cents below a year ago, but a more typical price spread with the barrels was restored.
The markets were closed Monday for the Labor Day holiday and Tuesday the blocks remained at Friday’s close. The barrels rolled out the week at $1.67, up 7 cents to restore the typical spread, but also 65 1/2-cents below a year ago. They were also unchanged Tuesday. Nine cars of block traded hands last week and three of barrel.
Global Dairy Trade Cheddar was at $1.3215 per pound U.S. on Sept. 1.
Midwest milk production is in a slow, late summer decline, says Dairy Market News. The current heat wave and bottling demand are pushing milk intakes slightly lower but manufacturers report available milk is adequate. Western milk intakes are reduced, due to increases in bottling demand and the seasonal decline in milk production but manufacturers report cheese production has remained active. Export opportunities for cheese are down but domestic demand is good and is keeping inventories from getting out of control.
Cash butter finished Friday at $2.4525, up 11 1/4-cents on the week but 39 1/4-cents below a year ago when it was trading at $2.8450 and on its way to set a record high that eventually topped $3 a pound. The spot butter was steady Tuesday.
GDT butter was at $1.2455. Thirteen cars traded hands in the week before Labor Day.
There were reports last week that fast food giant McDonald’s will begin using real butter instead of margarine, which may have contributed to the price strength, but Jerry Dryer, editor of the Dairy and Food Market Analyst, stated on Friday’s DairyLine that the McDonald’s announcement “contributes. They need to fill the pipeline to start using butter,” but he adds that there already was a strong demand for butterfat, whole milk, whole milk powder and butter has a lot of support from a lot of angles right now.”
When asked if McDonald’s decision will prompt other fast food chains to do the same, Dryer said, “It’s likely to, as butter has a nice halo around it right now.”
DMN says butter production in the Central region is steady. Milk intakes and butterfat components are trending lower, but some churners are curtailing cream spot sales to help fill churning schedules.
National butter holdings are above a year ago; however, market participants cite concern over how much butter is actually uncommitted and available to meet upcoming needs, especially since the McDonald’s announcement regarding the transition to butter.
Spot Grade A nonfat dry milk also had a good week, closing Friday at 90 cents per pound, up 13 cents on the week and the highest spot since June 11, but still 43 1/4-cents below a year ago. The powder gave back 3 cents Tuesday, slipping to 87 cents per pound. Thirteen cars traded hands last week at the CME, 10 were traded Tuesday.
GDT skim milk power finished Sept. 1 at 77.01 cents per pound U.S.
Benchmark milk price down
U.S. dairy farmers again have to contend with depressed milk prices, which come on the heels of last year’s record highs. The nation’s benchmark milk price slipped 6 cents. The Agriculture Department announced the August Federal order Class III price at $16.27 per hundredweight, down 6 cents from July, $5.98 below August 2014, and equates to about $1.40 per gallon, unchanged from July but compares to $1.91 a year ago.
The eight month Class III price average now stands at $16.07, down from $22.49 at this time a year ago and compares to $17.72 in 2013.
Looking ahead, it’s not very encouraging. The September Class III futures contract settled Tuesday at $16.14; October, $16.28; November, $16.12; and December settled at $15.87. That would result in a 2015 average of just $16.08, down from last year’s record $22.34 per cwt.
The Class III price is 53 cents above California’s comparable Class 4b price, but that is the smallest price gap since June 2011, thanks to the state mandated temporary increase in the whey pricing factor used in its pricing formula.
USDA will hold a hearing starting Sept. 22 in Clovis to discuss a proposal to establish a Federal Milk Marketing Order in the nation’s number 1 milk producer.
The August Federal order Class IV price is $12.90 per cwt., down 25 cents from July and $10.99 below a year ago. Its eight month average sits at $13.53, down from $23.28 a year ago and $18.37 in 2013.
Dairy products report bearish
You’ll recall that preliminary data showed July 2015 milk production totaled 16.6 billion pounds, according to USDA, up 1.2 percent compared to July 2014. USDA’s latest Dairy Products report shows where the milk went.
July total cheese output hit 988.4 million pounds, up 2.5 percent from June, up 3.1 percent from a year ago, and year to date production, at 6.8 billion pounds, was up 2.3 percent from a year ago. Italian cheese output hit 422.3 million pounds, up 1.1 percent from June, up 3.2 percent from a year ago, with YTD at 2.9 billion pounds, up 2.3 percent.
Mozzarella, at 331.7 million pounds, was up 1.3 percent from a year ago and YTD totaled 2.3 billion pounds, up 1.0 percent. American type cheese production totaled 393.2 million pounds, up 2.4 percent from June, up 3.4 percent from a year ago, with YTD output at 2.7 billion pounds, up 2.9 percent. Cheddar output in July amounted to 282.1 million pounds, up 4.7 percent from a year ago; with YTD at 1.97 billion pounds, up 2.5 percent.
HighGround Dairy’s Eric Meyer reports that “Total cheese production saw the slightest percentage decline from June in history (based on daily average basis). While July has more days of the month than June, U.S. daily average cheese production has a spring peak in April and begins declining through September. July only had production drop 248,000 pounds per day versus June. However, we do not count this as extremely bearish yet as inventories only rose by 20 million pounds on an extra 24 million pounds produced.”
Butter totaled 133.3 million pounds, down 6.2 percent from June, and 3.2 percent below a year ago, bringing YTD output to 1.1 billion pounds, down 1.7 percent.
Meyer says, “Butter production rolled below last year for the first time in three months. Counter-intuitive to basic supply and demand, extremely high butter prices does not translate to stronger production. There seems to be a bit of panic in the air with memories of last year fresh in buyers’ minds, but there is little evidence to suggest prices can hold at these historic levels for a second straight season once holiday demand has been fulfilled and imported fat begins making its way to shore in Fourth Quarter.”
Nonfat dry milk totaled 155.1 million pounds, down 6.9 percent, with YTD output hitting 1.2 billion pounds, up 8.5 percent.
Skim milk powder totaled 35.1 million pounds in July, up 23.0 percent, with YTD output at 255.4 million pounds, down 22.9 percent from 2014. The report pegged July 31 NFDM stocks at 269.7 million pounds, up 7.4 million pounds or 2.8 percent from June and 8.5 percent above a year ago.
EU to the rescue of its farmers
An emergency meeting was held Monday by European Union farm ministers to address the present challenges for a number of European agricultural sectors. The EU Commission proposed a comprehensive package of measures to address the cash-flow difficulties farmers are facing, stabilizing markets and addressing the functioning of the supply chain.
HighGround Dairy’s Eric Meyer reported that the actions included targeted aid to dairy farmers, extended and enhanced Private Storage Aid and several other measures, but he said the commission “went out of its way to address intervention,” giving a thumbs down to increasing prices.
Meyer concluded “There are certainly a number of steps the EU Commission has offered to address an extremely challenging environment for EU farmers, but we see a lot more ‘bark’ than we do actual ‘bite.’ What we know for sure is that direct payments to farmers will increase but not to what extent nor how they will distribute across member states. And we could not agree more with the commission that an increase in intervention prices would have little impact of rectifying the oversupply conditions within the global marketplace.”
Source: Capital Press
