Decline in cheese is a rare occurrence during the spring flush

Lee Mielke

The Fridge is far from empty but the Agriculture Department’s latest Cold Storage report shows inventories are not getting out of hand, at least on cheese.

American type stocks fell to 830.8 million pounds, down 3.6 million pounds or 0.4% from March, which was revised up 2.6 million pounds, and they were 3.5 million pounds or 0.4% below those a year ago.

The “other” cheese category saw stocks dip to 601.2 million pounds, down 10.7 million pounds or 1.7% from March and 17.5 million or 2.8% below a year ago.

The total cheese inventory stood at 1.45 billion pounds on April 30, down 15.9 million pounds or 1.1% from March and 25.5 million pounds or 1.7% below a year ago, ending five consecutive months that total cheese stocks grew.

The decline in cheese is a rare occurrence during the spring flush, first April decline since 1993, according to HighGround Dairy’s Lucas Fuess in the May 31 Dairy Radio Now broadcast. Fuess said the expanded cheese production capacity that came online in recent months, leads us to believe production was strong however this report would indicate that “demand is almost off the charts” and driven by retail and foodservice channels as the economy quickly reopened.

Butter stocks climbed to 385.3 million pounds, up a hefty 27.9 million pounds or 7.8% above the March inventory, which was revised up 2.8 million pounds. They were 12.7 million pounds or 3.4% above April 2020, making April the 22nd consecutive month that butter stocks topped those of a year ago. 

Fuess says the butter data was “pretty normal” but the heavy inventory will weigh on prices. HGD warns that butter stocks will only climb further in second quarter before reaching the yearly peak. 

Keep in mind, a year ago, COVID lockdowns had restaurants closing their doors, thus butter stocks grew quickly. It will be interesting to see what April butter output looked like in the next Dairy Products report issued June 4.

The StoneX Dairy Group however says that overall, they are still bullish on butter and expect stocks to fall below year ago levels by August, as competitive U.S. butter prices increase exports.

Speaking of exports, the U.S. Dairy Export Council reports that Southeast Asia surpassed Mexico to become the U.S. Number 1 dairy export market for volume in 2020, absorbing the equivalent of more than one day of total U.S. milk production per month. USDEC says “The region ranked Number 2 for sales, buying $1.26 billion in U.S. dairy products and ingredients, a 36% increase over the previous year, despite the challenges presented by a global pandemic.”

USDEC also opened its Center for Dairy Excellence in Singapore, stating “The investment signals a long-term commitment to a region that encompasses Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, plus Brunei Darussalam, Burma, Cambodia and Laos.” The combined population of those countries is more than 670 million, more than double the U.S. population.  

Checking prices at home; the Cold Storage data put the brakes on cheese prices falling, for a day at least. After plunging 15.50 cents the previous week, the Cheddar blocks closed the last Friday of May at $1.53 per pound, down 4 cents on the week, 27 cents below where it was on May 3, and 70 cents below a year ago when they pole vaulted 29.25 cents to $2.23 per pound.

The barrels entered the Memorial Day Weekend at $1.57 per pound, down 3.75 cents on the week, down 24.25 cents on the month, 45.25 cents below a year ago when they jumped 13.25 cents, but at an inverted 4 cents above the blocks. 

There were 36 cars of block traded on the week, 123 for the month, up from 85 in April. Barrel sales totaled 33 for the week, 110 for the month, up from 81 in April.

Some Midwestern cheese producers told Dairy Market News they were planning on running through Saturday and continuing on the Monday holiday. Others were down for updates and maintenance. Spot milk loads were being reported more regularly and cheesemakers were finding heavily discounted loads. 

Cheese demand remains mixed. Some retail Cheddar producers say buyer interest is and has been quite busy while other varietal cheesemakers were less busy. Barrel prices topping the blocks is viewed with a skeptical eye, says DMN. 

Cheese demand in the West has slowed in both retail and food service. Cheese production has remained strong, causing supplies to outpace demand. The weaker CME prices have some believing that is favorable for exports and could lead to an increase in demand. Cheese intended for export however continues to face delays due to congestion at ports and delays reportedly vary week to week.

Cash butter wasn’t helped by the Cold Storage data and fell to $1.7850 on Wednesday but finished Friday at $1.81, still down 6 cents on the week, up 5.75 cents on the month, and 15 cents above a year ago. There were 20 sales reported on the week, 56 for the month of May, down from 101 in April.

Food service butter demand shot up to pre-pandemic levels with the reopening of restaurants and public events earlier in the spring, says DMN, but once pipelines were closer to being refilled demand waned. There were some positive notes this week in food service demand from butter producers in the Central region. Cream was widely available ahead of the holiday weekend. Some plants were running normal schedules, while others were down for Memorial Day. Cream is available. Early in the week, contacts continued to report paying the extra costs for cream from the West, but by midweek some plants found loads in the region at multiples in the low 1.20s. Butter demand is better than some contacts expected for this time of the year, says DMN, but market tones are uncertain.

Western cream is in steady supply and is expected to briefly bump up as some dairy manufacturing paused over the long weekend. Ice cream continues to absorb much of the cream supply, but there’s still plenty for butter makers. Bulk butter inventories are stable, with some Southwestern butter makers working to grow inventories for later this year. Retail orders are lower but steady. Food service sales are picking up but some contacts report hesitation from buyers. Demand is not crystal clear, and it is difficult to accurately forecast needs. 

Grade A nonfat dry milk climbed to $1.3025 per pound Tuesday but slid back to a $1.2925 per pound close Friday, 0.50 cents lower on the week, 2.75 cents lower on the month, but 26.25 cents above that week a year ago. Sales totaled 23 for the week, 76 on the month, up from 58 in April.

CME dry whey saw its biggest single day drop since April 23 on Thursday, down 3 cents, and closed Friday at 62.25 cents per pound, down 2.25 cents on the week, down 3.75 cents from May 3, but 31.75 cents above a year ago. There were 3 sales on the week, 12 for the month, down from 17 in April.

There was talk of growing whey inventories in the U.S. this week and weaker Chinese and domestic demand, according to StoneX, plus port congestion and shipping constraints causing delays may have contributed to the weakness.

The USDA’s latest Crop Progress report shows 90% of the U.S. corn crop is planted, as of the week ending May 23, up from 80% the previous week, 3% ahead of a year ago, and 10% ahead of the five year average. 64% is emerged, 3% ahead of a year ago, and 10% ahead of the five year average.

Soybean plantings are at 75%, up from 61% the week before, 12% ahead of a year ago, and 21% ahead of the five year average. 41% are emerged, 8% ahead of a year ago and 16% ahead of the five year average. 

Cotton is 49% planted, 3% behind 2020 and 3% below the five year average.

Corn and soybean meal prices have fallen which is good news for dairy farmers buying feed. HGD’s Lucas Fuess said corn was at levels not seen in a month and soybean meal was at a level not seen since December.

StoneX stated in its May 26 Early Morning Update; “If the past two to three months have taught us anything it is that this year the cost of production (in terms of the effect high corn prices have had on producers) has not yet impacted producers’ willingness to make milk.” 

“Direct government payments throughout the course of 2020 and better on-farm financial conditions (particularly for Class III producers coming into 2021), help keep the milk shed flush with milk today. Our models have proven that a U.S. Gross Dairy Margin above $11.00 triggers herd expansion, but even with our margins sitting below that for most of this year, the dairy herd continues to grow.”  

Cooperatives Working Together (CWT) members accepted five offers of export assistance this week to help capture sales contracts for 50,706 pounds of Monterey Jack cheese, 432,106 pounds of whole milk powder, 2,205 pounds of anhydrous milkfat, and 152,119 pounds of cream cheese. The product is going to customers in Asia and South America and will be delivered through September.

CWT exports for 2021 now total 15.5 million pounds of American-type cheeses, 10.4 million pounds of butter (82% milkfat), 7.1 million pounds of anhydrous milkfat, 16.6 million pounds of whole milk powder, and 6.1 million pounds of cream cheese. The products are going to 30 countries and are the equivalent of 737.6 million pounds of milk on a milkfat basis, according to the CWT.

In politics; the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) praised U.S. Trade Representative Katherine Tai for initiating a U.S.-Mexico-Canada Agreement (USMCA) dispute settlement proceeding over Canada’s administration of dairy tariff rate quotas (TRQs).

USDEC President Krysta Harden charged that “Canada has failed to take the necessary action to be in compliance with its obligations under USMCA by restricting access to the TRQs.”  

NMPF President Jim Mulhern said “We appreciate the bipartisan work from Members of Congress to support America’s dairy industry on this important trade issue. Canada’s failure to take action over the past six months to fix the administration of its TRQs limits the ability of American dairy farmers and workers to benefit from the access that was negotiated in the agreement.”

USDEC and NMPF charged that “Canada has allocated its TRQs in a manner designed to discourage full use of the TRQs and limit imports of U.S. dairy products. Specifically, Canada is reserving the bulk of quota access to processors, who have little incentive to import U.S. dairy products, and are not providing fair or equitable procedures in administering the TRQs.” 

The International Dairy Foods Association also expressed support for the action.

The IDFA also joined NMPF in applauding more than 50 House members who sent a letter to Agriculture Secretary Tom Vilsack urging USDA to “Address the under consumption of dairy foods among American school-aged children, specifically by making permanent a current flexibility that allows schools to offer low-fat flavored milk, a nutrient dense option for improving the quality of children’s diets.”

The letter cited the 2020 Dietary Guidelines Advisory Committee report, which found that 79% of 9–13-year-olds, who rely on the school meal programs to meet their nutritional needs, are not meeting the recommended intake of dairy foods. “Both the 2015 and 2020 editions of the Dietary Guidelines for Americans amplified this concern, stating that, beginning at a young age, average dairy consumption falls short of recommended amounts,” the letter states.

Meanwhile, a new British study adds confirmation to previous U.S. studies praising milk as a benefit to the heart. Published in the International Journal of Obesity, the research found that drinking milk regularly can help lessen the chances of heart disease and even lower cholesterol levels.

Lastly, the Wisconsin-based American Dairy Coalition (ADA) applauded Senators Kirsten Gillibrand (D-NY) and Jeanne Shaheen (D-NH) for urging USDA to provide relief to dairy farmers impacted by negative PPDs. 

A Gillibrand press release detailed losses to dairy farmers resulting from changes made in the calculation of Class I milk prices, which helped many processors protect their risks while farmer’s risk management tools “no longer protected them from the severe devaluation of their milk. This change, compounded by government intervention in cheese purchases during the pandemic, has resulted in a catastrophic loss of billions of dollars for dairy farmers.”   

The ADA called on the USDA to “Heed the requests in the letter from Senators Gillibrand and Shaheen and to authorize additional relief to dairy farmers from all size dairy operations who suffered significant financial loss in order to ensure the viability of a strong national dairy economy.”

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