The Cheddar blocks, which climbed the previous Friday to $1.8150 per pound, closed the following Friday at $1.78, down 3 1/2-cents on the week but 8 3/4-cents above a year ago.
The Cheddar barrels, which hit $1.88 the previous Friday, closed the following week at $1.8650, down 1 1/2-cents on the week, 16 3/4-cents above a year ago, and 8 1/2-cents above the blocks. Six cars of block traded hands on the week at the CME and none of barrel.
Cheese was unchanged Monday and Tuesday as traders absorbed Tuesday’s Global Dairy Trade auction and anticipated Friday’s July Milk Production report.
Dairy Market News reports that Midwest milk production continues to fall and cheese manufacturers are adjusting production schedules accordingly.”
National Milk called on Agriculture Secretary Tom Vilsack to “help dairy farmers enduring the lowest milk prices since the Great Recession of 2009” by providing “a measure of relief by purchasing at least $100 million worth of cheese products for donation to the needy, a measure that would help both farmers and food insecure Americans who patronize food banks.”
It remains to be seen whether in this very political year the administration will approve the request. Dairy farmers have surely had a rough time of late but, as the Aug. 15 Daily Dairy Report points out, “August Class III futures settled at $17.00, higher than in any month since late 2014. Every Class III contract on the board, which stretches to July 2018, stands at $16 per cwt. or higher.”
The butter roller coaster climbed to $2.27 per pound on Aug. 5, then dropped to $2.22, but regained some last Friday, closing at $2.25, down 2 cents on the week but 18 1/2-cents above a year ago. Only two cars were sold on the week.
The spot price was steady Monday and jumped to $2.28 Tuesday on three trades but a fourth sale took it back to $2.24, with two offers at that price going uncovered.
Central butter production is active, according to DMN, and several manufacturers are running full schedules, though “a few contacts report the availability of cream is decreasing slightly.”
Western butter output continues steady but “suppliers and consumers will be closely watching the availability of cream over the next few weeks.”
Cash Grade A nonfat dry milk continues its ups and downs but closed Friday at 83 1/4-cents per pound, unchanged on the week but 14 1/4-cents above a year ago, with 23 cars finding new homes on the week.
Monday’s powder was down three-quarters but it rallied Tuesday, jumping 1 3/4-cents, to 84 1/4-cents per pound.
Global prices soar
Market bulls got more to feed on in Tuesday’s Global Dairy Trade auction. The weighted average for all products offered, like an Olympic-style pole vaulter, jumped 12.7 percent, biggest gain since Sept. 16, 2015, following a 6.6 percent climb Aug. 2.
All products offered registered sharp gains, led by whole milk powder, up 18.9 percent, after jumping 9.9 percent in the last event.
Butter was up 14.1 percent, following an impressive 6.6 percent increase last time. Cheddar cheese was up 8.9 percent, after inching 0.8 percent lower last time. Skim milk powder was up 3.0 percent, after gaining 2.1 percent on Aug. 2.
FC Stone equates the average GDT butter price to $1.5082 per pound U.S. CME butter closed Tuesday at $2.24 per pound. GDT Cheddar cheese equated to about $1.4320 per pound U.S. and compares to Tuesday’s CME block Cheddar at $1.78.
GDT skim milk powder hit 91.97 cents per pound U.S. and whole milk powder averaged $1.2223 per pound U.S. CME Grade A nonfat dry milk closed Tuesday at 84 1/4-cents per pound.
FC Stone’s Dave Kurzawski points to “strong volume again going to North and South Asia” and asked “What about Kim Jong Un’s purchasing power? The North might be pushing this thing in secret.”
The key takeaway, according to Kurzawski, is the gain of WMP over SMP “as should be the case given the reduction in WMP production in favor of more SMP in the world.”
“The concern to market bulls needs probably to be most on the lack of Middle Eastern buying where a lot of SMP has to move, as well as some fat. With crude prices low there should be medium term concern over their viability as large scale buyers.”
“Bulls also need to keep tabs on how much of respective forward portfolios the Oceania processors are actually able to sell at these levels and whether this is a panic buying wave or will be sustained.”
Milk estimate lowered
USDA lowered its 2016 milk production forecast from last month in its World Agricultural Supply and Demand Estimates report, on a reduced estimate on milk per cow.
The 2017 forecast was higher as forecast milk prices and lower feed costs in late 2016 and 2017 are expected to lead to a “modest expansion in the cow inventory and more rapid growth in milk per cow.”
2016 production and marketings were projected at 212.1 and 211.1 billion pounds, respectively, down 300 million pounds from last month on production and 400 million pounds less on marketings.
If realized, 2016 production would be up 3.5 billion pounds or 1.7 percent from 2015. 2017 production and marketings were projected at 215.8 billion and 214.9 billion pounds, respectively, are up 200 million pounds in production and 300 million in marketings from last month.
If realized, 2017 production would be up 3.7 billion pounds or 1.7 percent from 2016. The 2016 Class III milk price was raised, reflecting expected higher cheese and whey prices. Look for a range of $14.80-$15.00 per hundredweight, up 80-90 cents from last month’s estimate. The 2017 average is put at $15.00-$16.00, up 50 cents.
The Class IV price forecast was lowered as a lower expected butter price more than offsets the higher nonfat dry milk price. Look for a 2016 average of $13.75-$14.05, down 5-15 cents from last month’s projection. The 2017 average is put at $13.60-$14.70, up a dime from last month’s report.
California Class I up
California’s September Class I milk price is $18.12 per hundredweight for the north and $18.39 for the south. Both are up $1.75 from August, 4 cents above September 2015, and the highest Class I prices since December 2015.
The nine-month average stands at $15.78 for the north, down from $17.65 at this time a year ago and $24.78 in 2014. The southern average, at $16.05, is down from $17.92 a year ago and $25.05 in 2014.
Source: CapitalPress
Link: http://www.capitalpress.com/Dairy/20160816/dairy-prices-ride-roller-coaster