Inventory is balanced with fresh supply being supplemented with inventory to meet demand. There are reports substantial amounts of cheese are on the way to our shores as world prices and the level of the U.S. dollar are making imports very attractive.
This is exactly what happened with butter a few weeks ago and the result was substantially lower price.
Cheese supply and price is in a different posture than butter was, but nevertheless, this could result in some unwanted impact on the market.
Block and barrels prices historically tended to remain close to each other with a normal price spread of 3 to 4 cents with blocks above barrels.
During the past few years there has been substantial variation of this price spread with barrels above blocks many times for extended periods of time.
There have been many times with exceptionally wide spreads of blocks over barrels. This does not appear to be quite the effort as there was in the past in order to keep these prices closer together.
Supply and demand is the greater force and not just the maintaining of a typical price spread. The overall market is weak and lower prices are anticipated, but not without volatility.
For the week ending Oct. 31, Cheddar blocks were unchanged at $2.14 with six loads traded. Barrels closed at $2.11, up 18.75 cents with no loads traded.
This moved the block-barrel spread back to a normal 3 cents where it has not been for quite some time again. Butter closed the week at $1.89 with 20 loads traded. Grade A non-fat dry milk price declined 0.25 cents to $1.2425 with one load traded.
Whey price weakening
Dry whey prices have been holding in a tight range for some time, but are now weakening. Whey production is higher as a result of increasing cheese production.
Spot market offerings are increasing with some discounting taking place. Export orders have slowed resulting in greater supply available to U.S. buyers.
Milk-feed ratio highest in 6 years
The October milk-feed ratio moved to 3.07, the highest level since November 2008. This certainly is good news for dairy farmers.
This ratio compares with a ratio of 2.97 in September and 2.10 a year ago. This puts income over feed costs (IOFC) to a record $17.06, up one cent from the record set last month.
It is not going to get any better than this for a while as the November income over feed costs is going to be lower.
The all-milk price for October is $25.30, down 40 cents from September. Corn price declined 20 cents to $3.28. Soybean price declined $1.26 to $9.64.
Alfalfa hay price declined $3 per ton to an average price of $194. Milk price is expected to drop back, but will remain high for a couple of months ensuring the milk-feed ratio should remain good for a period of time.
MPP deadline extended
The deadline for signing up for the Milk Protection Program (MPP) has been extended to Dec. 5 rather instead of Nov. 28. The government decided that it was not a good idea to have the last day to sign up being on Black Friday.
AMS prices
For the week ending Oct. 25, Agricultural Marketing Service (AMS) prices were mostly higher. Prices for 40-pound Cheddar blocks declined 3 cents to $2.22.
The price for 500-pound barrels, adjusted to 38 percent moisture, averaged $2.17, down 4.5 cents.
U.S. Department of Agriculture (USDA) grade AA butter averaged $2.20 for the week, down 49.9 cents.
Non-fat dry milk averaged $1.49, down 2.0 cents. Dry whey averaged 63.9 cents, down 1.3 cents.
Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in commodity trading, which may not be suitable for recipients of this publication.
Source: AgriView
