New Zealand, Germany and Poland recorded fresh highs to start a calendar year
China was the proverbial “bull in the china shop” when it came to the latest import data. Reminiscent of its buying in 2014, data was released this week for both January and February, which was the case last year, but HighGround Dairy (HGD) says January marked the highest volumes on record for any month.
Whole milk powder imports in the two months totaled 530.4 million pounds, up 7.4% from 2020. Skim milk powder totaled 192.5 million pounds, up 35.9%. Butter, at 46.2 million pounds, was down 18.8%, but cheese totaled 67.7 million pounds, up 33.7%, year to date. Whey product imports amounted to 277.1 million pounds, up 49.2% from the same period a year ago.
The biggest leap was in whole milk powder from New Zealand, according to HGD, and fluid milk and cream from the EU-27. China frontloaded both whole and skim milk powder in January, as they typically do, says HGD, “but it came at an even stronger pace than usual given global shipping uncertainty.”
New Zealand, Germany and Poland recorded fresh highs to start a calendar year, according to HGD, and while imports from the U.S. were also strong, whey demand was slightly below that of 2018. China brought in more product from Belarus, EU and Turkey, says HGD, blaming shipping issues for the decline.
HGD says that remembering why food prices are inflated in China helps to project upcoming demand and points to “food shortages due to disease and weather, alongside rising needs and a growing middle class. China does not have enough productive farmland, keeping food imports critical. If a pandemic could not stop China from recording record dairy imports in 2020, consumption trends throughout this year will be strong as well. The country is turning to protein of any sort, including dairy, driving global values higher in recent weeks where they will stay until Chinese buyers are satisfied with inventory levels,” HGD said.
New Zealand exports are faring well, thanks to China, and continue to break records. February data was similar to January, says HGD, with growth primarily in whole milk powder and fluid milk and cream. Cheese exports started the year at five year highs as exports to China accounted for 25.5% market share for the first two months of 2021.
Back in the USA, February butter stocks climbed to 352.7 million pounds, up 20.8 million pounds or 6.3% from the January level, which was revised 3.5 million pounds higher than what was reported a month ago. Butter stocks are a whopping 50.9 million pounds or 16.8% above Feb. 2020.
February was the 20th consecutive month that butter stocks topped those a year ago however the build was smaller than many expected. That is a positive but butter output remains strong and we’ll get more details in the February Dairy Products report issued April 1.
American type cheese stocks hit 816 million pounds, up 6.9 million pounds or 0.9% from January, which was revised up 8.3 million pounds, and is 37.7 million or 4.8% above a year ago.
The “other” cheese category jumped to 597.5 million pounds, up 19.6 million pounds or 3.4% from January and 37.8 million or 6.8% above a year ago.
The total cheese inventory stood at 1.44 billion pounds, up 27.8 million pounds or 2.0% from January and 74.1 million pounds or 5.4% above a year ago.
February was the fourth month in a row that total cheese stocks grew. Revisions for January amounted to 10 million pounds, which HGD says is “a report-to-report build of 38 million pounds, a more bearish number than the initial February data would suggest.” And, with the spring flush upon us, cheese output will no doubt rise and that could push cheese stocks to new record highs.
“Are we dealing with a lack of demand or really strong production?” asks StoneX. “We side with stronger cheese production. Demand was on solid footing back in February and it likely got better in March thanks to improving foodservice sales. But supply of milk is also very good and with programs like Food Box continuing through April (at least), we presume that manufacturers have begun to shift away from constrained production practices of last year. Additionally, we expect some export cheese was sitting in coolers stateside unable to ﬁnd passage to its ﬁnal destination.” The stuck cargo ship in the Suez Canal was not helping matters.
Speaking of the Food Box program, the much awaited 12-hour USDA call to help determine the program’s fate took place March 22. Speakers were given 3 minutes to address the call and StoneX says “The key takeaway seems to be resounding support to establish a permanent food box program. Beyond that, participants want the USDA to consider more than the lowest price bids, verify what is in the boxes, lighten the weight of the boxes (probably by removing the half-gallon of milk), give longer lead time between awards and delivery, and build out long-term contracts to allow better planning. The takeaway for the markets is that a better organized and executed Food Box program is better handled by participants and less shocking to market prices.”
National Milk called for federal officials to “effectively allocate dairy products as a source of high-quality, cost-effective nutrition” in any successor program.
Meanwhile, Agriculture Secretary Tom Vilsack says USDA is establishing new programs and efforts to bring financial assistance to farmers, ranchers and producers who felt the impact of COVID-19 market disruptions.
“The new initiative, USDA Pandemic Assistance for Producers, will reach a broader set of producers than in previous COVID-19 aid programs,” according to a USDA press release. “USDA is dedicating at least $6 billion toward the new programs. The Department will also develop rules for new programs that will put a greater emphasis on outreach to small and socially disadvantaged producers, specialty crop and organic producers, timber harvesters, as well as provide support for the food supply chain and producers of renewable fuel, among others. Existing programs like the Coronavirus Food Assistance Program (CFAP) will fall within the new initiative and, where statutory authority allows, will be refined to better address the needs of producers.”
Dairy cow culling was down in February and slightly below February 2020. The latest Livestock Slaughter report shows an estimated 265,200 head were sent to slaughter under federal inspection, down 12,100 head from January and 900 or 0.3% below February 2020. Culling in the first two months of 2021 totaled 542,500 head, down 22,100 head or 3.9% from the same period a year ago.
In the week ending Mar. 13, 68,800 dairy cows were sent to slaughter, down 1,600 from the previous week but 3,100 or 4.7% more than that week a year ago.
While slaughter is below that of a year ago, StoneX points out that “We’re killing them at about the same pace we can replace them which matches up with the slowdown in herd growth the USDA reported for February.”
Cheese prices continued to weaken in the first part of the last full week of March but then rallied. The Cheddar blocks fell to $1.67 per pound on Wednesday, lowest since Mar. 3. They closed Friday at $1.72, down 7 cents on the week but 13 cents above a year ago when the COBID factor began hitting the markets. The blocks tumbled 24.75 cents that week and the barrels were down 9 cents.
The barrels slumped to $1.4375 on Monday but finished Friday at $1.4625, up a penny on the week, 12.25 cents above a year ago, but 25.75 cents below the blocks. Sales for the week included 4 cars of block and 3 of barrel.
Dairy Market News reports that some Midwestern cheese producers are and have been running full schedules while others are picking up. Food service cheese demand is not at pre-pandemic levels but has picked up quite a bit in the late winter/early spring season. Cheese availability reports were similar to those of production and vary plant to plant. Some producers are moving cheese out the door while others have available loads here and there. Market tones are mixed.
Food service demand for Western cheese continues to rise with the loosening of COVID restrictions while retail demand has held steady. Export demand is strong despite the ongoing issues at the ports and tightness of shipping supplies.
DMN says “As market prices edged lower for block cheese, international buyer interest has ticked back up.” Plenty of milk is available and plants are running at or near capacity but cheese is moving well. Cheese inventories are around or slightly higher than a year ago.
Spot butter got a bounce from the Cold Storage data, closing Friday at $1.7750, up 11 cents on the week, highest since June 24, 2020, and 28.75 cents above a year ago when the butter had a 26.75 cent meltdown. Sales totaled 7 loads.
Butter contacts tell DMN that food service demand has grown but some say it softened slightly from the previous week. General demand tones have “turned a corner from previous months,” says DMN, but “there is a lot of butter available.” Cream tightening continued this week but “The big question is, which direction cream availability will take following the spring holidays.” Some contacts expect steadiness then further tightness, while others expect some loosening considering the flush season, but market tones remain “somewhat sturdy.”
Cream is ample in the West, but some contacts expect the supply may start tightening for butter makers as ice cream, sour cream, and cream cheese makers are increasing intakes. Some manufacturers report heavy butter inventories that are still growing however U.S. butter is competitively priced in international markets and export interest remains steady. Retail sales are down slightly compared to early COVID supply stockpiling from a year ago, but retail butter demand is reportedly strong heading into the spring holiday season. With restrictions softening and consumer comfort levels growing for dining out, food service demand continues to strengthen, says DMN.
Spot Grade A nonfat dry milk also strengthened on the week, climbing to a $1.17 per pound Friday close, 1.75 cents higher on the week and 25 cents above a year ago when the powder fell 6.75 cents. There were 16 sales on the week.
Dry whey set another record high since trading began on the CME, hitting 62.75 cents per pound on Wednesday, a level not seen in previous NASS-surveyed prices since 2014. It was unchanged the rest of the week, up 1.50 cents on the week and 29.75 cents above a year ago. Only 2 sales were reported all week.
Cooperatives Working Together (CWT) member cooperatives accepted 34 offers of export assistance this week that pushed the milk equivalent of CWT assisted export sales in 2021 over one half billion pounds. Sales included 1.368 million pounds of Cheddar, Gouda, and Monterey Jack cheese, 699,417 pounds of butter, 1.64 million pounds of anhydrous milkfat (AMF), 335,103 pounds of cream cheese, and 4.41 million of whole milk powder.
The product will go to customers in Asia, Central and South America, the Middle East, North Africa, and Oceania through July and puts CWT 2021 exports at 11.2 million pounds of American-type cheeses, 8.35 million pounds of butter, 3.65 million pounds of AMF, 13.54 million of whole milk powder, and 3.87 million pounds of cream cheese and will go to 23 countries.
Hoards Dairyman Managing Editor, Corey Geiger, gave listeners a lesson on cheese in the March 29 Dairy Radio Now broadcast. Based on a recent Dairy Livestream program, we talked about blocks and barrels because they are so much a part of milk pricing but Geiger said that the two are not created equal.
Blocks can be either 40-pounds or 640 pounds, while barrels weigh in at 500 pounds. Most cheese plants specialize in one or the other and there’s often not much switching between the two. Blocks are usually “ready to eat,” he said, and have a certain flavor and melting consistency. They are also colored by a natural additive and most Americans outside of the Northeast eat a yellow Cheddar.
One of the participants in the Livestream was Kurt Epprecht, who operates Ohio-based Great Lakes Cheese Company. Epprecht said that barrels are generally an easier bet for cheesemakers to make because of their valuable white whey.
Most customers who buy whey, a byproduct of the cheese making process, want it to be white, Geiger explained. Whey is typically made from barrel Cheddar which is white and therefore has more value. Many countries stipulate that they will not accept bleached whey, a necessary process if it comes from yellow Cheddar. That’s very important in the infant formula market, Geiger said.
Another topic of the Livestream concerned the use of Mozzarella cheese in milk price discovery. Mozzarella is the most consumed cheese in the U.S., according to Geiger, even ahead of Cheddar, but one of the participants, dairy buyer and trader, Ted Jacoby, CEO of T.C. Jacoby and Company, says including Mozzarella in milk pricing would be difficult.
He points out that every plant which produces Mozzarella differs “so an even exchange for Mozzarella is a really difficult thing to establish.” And, “Most Mozzarella is a part-skim product, so you’re automatically skimming fat,” he said, and “The components are different than a whole milk cheese, so that throws off that correlation between Cheddar and Mozzarella. Mozzarella can also be sold frozen, while most Cheddars cannot, so bottom line, Geiger believes block and barrel Cheddar will remain a mainstay in price discovery.
Last of all, we wanted to know. Is barrel cheese really in a barrel? “It used to kind of resemble a chemical or fluid barrel,” answered Epprecht, “It was metal, but since then, it has gone to a plastic bag and a corrugated box with multiple dimensions. It was very much a barrel at one point, but now it’s a cylindrical 500-pound block that is usually vacuum-packed,” he concluded.
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 firstname.lastname@example.org.