The bulls are feeding on the latest Global Dairy Trade (GDT) auction where the weighted average for all products offered advanced for the fourth consecutive event, up 3.6 percent, following a 3.1 percent jump April 18.
The only negative move was in skim milk powder, down 0.9 percent, after it led the gains last time with a 7.1 percent rise.
Buttermilk powder led the gains this time, jumping 21.8 percent. It was not traded in the last event. Rennet casein was up 10.4 percent. Whole milk powder was up 5.2 percent, after rising 3.5 percent. Anhydrous milkfat was up 4.7 percent, after it inched 0.5 percent lower, and GDT Cheddar was up 4.6 percent, following a 6 percent advance. Lactose and butter were both up 1 percent, following respective gains of 1.2 and 2.9 percent last time. The butter price is a GDT record high, according to the Daily Dairy Report (DDR).
FC Stone equated the average 80 percent butterfat GDT butter price to $2.1733 per pound U.S. CME butter closed Friday at a globally competitive $2.1075 per pound. GDT Cheddar cheese equated to $1.6628 per pound U.S. and compares to Friday’s CME block Cheddar at $1.60. GDT skim milk powder was 89.89 cents per pound and whole milk powder averaged $1.4665 per pound U.S. CME Grade A nonfat dry milk price closed Friday at 84 1/2-cents per pound.
The May 4 DDR reported that March U.S. cheese exports improved to their highest level since April 2015, according to the U.S. Census Bureau. Nonfat dry milk and skim milk powder exports, while down from February, were above a year ago and overall, the DDR says cheese and powder are “keeping pace with rising production and are thus helping to balance the domestic market.”
The April Federal order benchmark Class III milk price is $15.22 per hundredweight, down 59 cents from March but $1.59 above April 2016 and equates to $1.31 per gallon. It is the lowest Class III price since October 2016 but that may be the bottom for 2017. The May contract was trading late Friday morning at $15.61 and June was at $15.94, with a peak at $17.04 in September.
The Class III average is $16.17, up from $13.72 a year ago and $15.75 in 2015.
The April Class IV price is $14.01, down 31 cents from March, $1.33 above a year ago, but the lowest Class IV since November 2016. Its four-month average is at $15.03, up from $13.06 a year ago and $13.59 in 2015.
California’s April Class 4b cheese-milk price is $14.30 per cwt., up 54 cents from March, first move to the upside since November 2016, and is $1.59 above April 2016 but is 92 cents below the comparable FO Class III price. The four-month 4b average is at $14.97, up from $13.02 a year ago and $13.93 in 2015.
The 4a butter-powder price is $13.73, down 23 cents from March, $1.19 above a year ago, but the lowest 4a price since November 2016. The 4a average is now at $14.69, up from $12.87 a year ago and $13.33 in 2015.
March 50-State milk production totaled 18.7 billion pounds, up 1.7 percent from March 2016. USDA’s latest Dairy Products report shows where that milk went.
March cheese output totaled 1.1 billion pounds, up 12.7 percent from February and 3.3 percent above March 2016. Year to date (YTD) cheese output stands at 3.0 billion pounds, up 1.6 percent from this time a year ago.
California produced 216.5 million pounds of that cheese, up 12.7 percent from February and 0.7 percent above a year ago. Wisconsin, at 288.4 million pounds, was up 13.5 percent from February and 5.6 percent above a year ago. Idaho output was up 0.3 percent from a year ago. Minnesota was up 3.8 percent.
Italian cheese output totaled 468.5 million pounds, up 15.2 percent from February and 2.2 percent above a year ago, with YTD output at 1.3 billion pounds, up 0.2 percent. Mozzarella, at 361.2 million pounds, was up 0.9 percent, with YTD at 1.0 billion pounds, down 0.7 percent.
Total American type cheese production hit 415.5 million pounds, up 11.2 percent from February and 3.5 percent above a year ago. YTD totaled 1.2 million pounds, up 3.1 percent. Cheddar output amounted to 309.3million pounds, up a bearish 8 percent, with YTD at 896.8 million pounds, up 6.6 percent from a year ago.
Churns produced 175.5 million pounds of butter, up 9 percent from February and 0.3 percent above a year ago. YTD totaled 514.4 million pounds, up 0.1 percent.
California butter totaled 50.7 million pounds, up 4.3 percent from February but down 8.6 from a year ago. New York output was down 2.7 percent from February and 0.2 percent below a year ago while Pennsylvania was up 2.5 percent from February but 6.5 percent below a year ago.
Yogurt output amounted to 390.5 million pounds, down 2.5 percent from a year ago, with YTD at 1.1 billion pounds, down 2.5 percent.
Dry whey totaled 88 million pounds, down 6.4 percent, with YTD hitting 248.3 million pounds, up 3 percent.
Nonfat dry milk production totaled 159.7 million pounds, down 13 percent from February and 7.2 percent below a year ago, with YTD at 454.5 million pounds, up 0.4 percent. Skim milk powder production totaled 52.7 million pounds, up 31.8 percent from February and 30 percent above a year ago. YTD output is at 148 million pounds, up 12.2 percent. The report also showed March nonfat dry milk stocks at 247 million pounds, down 5.8 percent from February but 6.4 percent above a year ago.
Most dairy prices moved higher despite a lot of product moving to Chicago. Cash Cheddar blocks closed the first Friday of May at $1.60 per pound, up 12 cents on the week and 29 1/2-cents above a year ago. The barrels finished at $1.45, up 3 1/4-cents on the week, 15 cents above a year ago when they plunged 11 1/4 cents, but are a much higher than normal 15 cents below the blocks. Four cars of block traded hands on the week at the CME and a whopping 54 cars of barrel.
FC Stone’s May 4 Early Morning Update stated; “It’s not shocking that heavier volume is being brought to the exchange as heavy milk flows and ramped-up cheese production are testing capacity levels and have pushed inventories into record territory.”
Dairy Market News (DMN) echoed that sentiment, reporting that milk remains readily available for cheese producers in the Midwest. Spot milk prices range $3.00 to $6.00 under Class, so cheese producers are taking advantage of the market, whereas up until recent weeks, they were unable or unwilling. Cheese inventories are generally reported as long. However, some manufacturers report steady ongoing orders have kept stocks in balance. Retail and food service demand is generally steady but the market tone is “uncertain.”
Looking west, ample supplies of milk are placing pressures on some cheese manufacturers. Western output is active and cheese makers are trying to figure out how best to balance cheese making with available milk intakes. Inventories are also heavy, especially for barrels, but cheese demand is “satisfactory.”
Butter closed May 5 at $2.1075 per pound, up a quarter-cent on the week and 5 3/4-cents above a year ago when it lost 7 cents, with 43 cars sold this week.
Class II manufacturers’ interests in cream have risen noticeably, according to DMN, yet cream remains available for churns in the Central region. Some have slowed production slightly, others are churning abundant cream and storing butter for late summer and fall. Butter demand is generally steady, the market tone is fair, but butter inventories are building.
Western contacts suggest that sales have flattened out since the spring holidays. Butter demand is steady, however buyers do not feel compelled to make additional purchases. Inventories are building seasonally and in some cases, are already heavy. There is plenty of cream available for churning, warns DMN.
Spot Grade A nonfat dry milk closed the week at 84 1/2-cents per pound, down 2 1/4-cents but 7 cents above a year ago. Thirteen cars exchanged hands.
Penn State’s James Dunn’s Dairy Outlook says; “The dollar is still strong, and gained value relative to the New Zealand and Aussie dollars, while weakening very slightly against the Euro. These changes hurt our competitiveness against the Euro and help our competitiveness against Australia and New Zealand.”
Dunn says “The long-term issues depressing dairy prices are still the strong dollar, the continuing Russian embargo on dairy imports from the EU, and problems in the Middle East. Overall the outlook for milk prices for 2017 is better than 2016, almost the same as it was a few weeks ago. Feed prices will remain low, so dairy profitability this year should be better than in 2016.”
“Corn and soybean meal prices are lower than last month, but only slightly,” according to Dunn. “The South American corn and soybean crops are very good and world inventories are very high. U.S. exports of corn and beans are very large, the most in a decade for corn and the most ever for beans.”
He says “There is no reason to expect corn and soybean meal prices to increase, given the very large inventories worldwide if 2017 crops are good. Some corn acreage will go to beans this year, given the relative prices.”
“Income over Feed Costs (IOFC) Penn State’s measure of income over feed costs fell by 7.1 percent in April from its March value. The change in April’s value is because the milk price has fallen. The two month’s feed cost values are identical. Income over feed cost reflects daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day.”
“The milk margin is the estimated amount of the Pennsylvania all milk price that remains after the feed costs per hundredweight of milk production are paid. Like income over feed cost, this measure shows that the April PA milk margin was 7.1 percent lower than in March,” says Dunn.
The latest Crop Progress report shows 34 percent of the U.S. corn crop is in the ground, as of the week of April 30, up from 17 percent the previous week, down from 43 percent a year ago, and dead even with the five year average.
Fourteen percent of the cotton is planted, up from 11 percent the week before, 1 percent behind a year ago and 3 percent behind the five year average.
The soybean crop is 10 percent planted, up from 6 percent the previous week, 3 percent ahead of a year ago and 3 percent ahead of the five year average.
Meanwhile; Chicago-based Commodity & Ingredient Hedging LLC’s latest Margin Watch (MW) says “Dairy margins were slightly stronger over the last half of April, due primarily to a small recovery in milk prices as feed costs held mostly steady.” “Margins remain positive and above average through First Quarter 2018, offering dairies opportunities to protect breakeven levels,” the MW states.
Cooperatives Working Together (CWT) accepted four requests for export assistance the first week of May from member cooperatives to sell 493,836 pounds of cheese to customers in Asia.
In politics; newly confirmed Secretary of Agriculture Sonny Perdue has begun the process of returning greater authority to local school districts on food served in the school lunch line, according to Bob Gray, editor of the Northeast Dairy Farmers Cooperatives Newsletter. Gray says Perdue’s proclamation deals specifically with schools obtaining whole grain products and sodium requirements consistent with USDA standards for the school years 2017-2020.
It also relaxes a 2010 law that mandated schools only serve non-fat flavored milk in the school lunch line. Gray says that resulted in “much less milk being consumed by students and certainly has been a contributing factor in the decline of fluid milk sales over the last several years.”
The proclamation calls for 1 percent flavored milk to be offered as part of the school lunch package and, while Gray says he wishes it would have included 2 and 3.5 percent fat milk, “it is clearly a step in the right direction.” The action also drew praise from the National Milk Producers Federation (NMPF) and the International Dairy Foods Association (IDFA).
A report issued April 28 by the U.S. Trade Representative (USTR) “outlined the Trump Administration’s continuing commitment to curtailing the damaging abuses of geographical indications (GIs), particularly by the European Union (EU),” according to a joint press release from the Consortium for Common Food Names (CCFN), NMPF, U.S. Dairy Export Council (USDEC), and the IDFA.
“The report highlighted ongoing threats to U.S. companies that legally use common food names both within the U.S. and in global trade. USTR’s annual report outlined extensive efforts that the administration is making in numerous countries to stem the EU’s efforts to use GIs to erect barriers to U.S. exports.”
U.S. dairy leaders were also in Washington, D.C. this week to urge Congress and Trump Administration to hold Canada accountable for its trade violations and hasten the repeal of Canada’s controversial new dairy pricing system.
NMPF also called on plant-based food companies meeting in California this week to assess the consistency of the labeling of their products. “Dairy imitators must start complying with federal regulations that require foods such as milk, cheese, ice cream and yogurt to be made from real milk,” says an NMPF press release, “At a time when consumers want real food, this ‘fake food’ movement has gone in the opposite direction.”
Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at email@example.com.