Midwest cheese producers tell Dairy Market News that milk availability is “sloppy”
Sharp declines in cheese, powder, and butter resulted in the biggest drop in the Global Dairy Trade’s (GDT) weighted average since March 16. The July 6 average fell 3.6%, following a 1.3% slip on June 15, and the sixth consecutive loss. Traders brought 53.5 million pounds of product to market, up from 47.4 million in the last event, and the largest since March 16. The average winning price was $3,924, down from $4,083, lowest since February 16, and HighGround Dairy points out the session had the fewest bidding rounds since Mar. 7, 2017.
The losses were led by buttermilk powder, down 9.8%. GDT Cheddar was down 9.2%, following a 0.2% gain on June 15. Skim milk powder and whole milk powder were down 7.0% and 3.0% respectively, after skim milk powder fell 1.7% in the last event and whole milk powder was down 1.8%. Anhydrous milkfat was off 0.9%, after it inched up 0.6% last time.
StoneX Dairy Group says the GDT 80% butterfat butter price equates to $1.9728 per pound U.S., down 6.8 cents from the last event, and compares to CME butter which closed Friday at $1.6750. GDT Cheddar, at $1.7913, was down 17.2 cents, and compares to Friday’s CME block Cheddar at $1.7250. GDT skim milk powder averaged $1.4182 per pound, down from $1.5222, or 10.4 cents. Whole milk powder averaged $1.7525 per pound, down from $1.8128 or 6 cents. CME Grade A nonfat dry milk closed Friday at $1.25 per pound.
Meanwhile; U.S. dairy exports have been strong, which is good news considering how U.S. milk production keeps rising. The U.S., Mexico, Canada Free Trade Agreement however has resulted in some friction between the U.S. and Canada.
Hoards Dairyman Managing Editor, Corey Geiger, speaking in the July 12 Dairy Radio Now broadcast, said it’s no surprise that dairy was the first dispute in the USMCA. At issue is what are called Trade Rate Quotas or TRQs. The TRQs are import permits, he said, given to importers of record, typically dairy processors, trading companies, brokers, and other similar organizations.
What the U.S. is trying to say, said Geiger; you can’t allocate TRQs to an entity who knowingly won’t use it, according to Gregg Doud, former Chief Agricultural Negotiator for the U.S. Trade Representative under the Trump Administration. The dispute comes with high stakes, according to Doud, because “ultimately it will become a benchmark for the effectiveness of the entire USMCA agreement.”
Doud says the objection has validity and the U.S. Trade Representative would not have brought the case if it didn’t really believe it would win it.
We also congratulated Corey on the writing of his book, “On a Wisconsin Family Farm,” which details the creation of “America’s Dairyland” and the work done over the years by those who immigrated to this country in the farming community. The book has seen sales in 36 states and three countries, he said, and is available at national book sellers or at www.coreygeiger.com.
You’ll recall May milk production totaled 19.85 billion pounds, up a hefty 4.6% from May 2020, according to USDA’s preliminary data. The latest Dairy Products report shows where that milk ended up, though StoneX Dairy reminds us that milk production last May was down from the previous year, as co-ops and milk buyers put incentives into place to limit output which led to big drops in butter and nonfat dry milk production. That was not the case this year.
May cheese production totaled 1.156 billion pounds, up 1.8% from April and a bearish 5.0% above may 2020. Year to date (YTD) cheese output hit 5.6 billion pounds, up 4.0% from the same period in 2020.
Checking the top five manufacturers; Wisconsin produced 295.6 million pounds, up 4.6% from April and 5.1% above a year ago. California delivered 207.3 million pounds, same as April but 1.9% below a year ago. Idaho contributed 79.5 million pounds, down 8.6% from April and 1.4% below a year ago.
Italian style cheese totaled 481.3 million pounds, down 0.1% from April and 0.2% below a year ago. YTD Italian was at 2.4 billion pounds, up 1.7%.
American type cheese, at 473.1 million pounds, was up 0.1% from April and 7.2% above a year ago. YTD American was at 2.3 billion pounds, up 6.0%.
Mozzarella output totaled 376.7 million pounds, down 0.7% from a year ago, with YTD mozzarella at 1.9 billion pounds, up 0.5% from 2020.
Cheddar, the cheese traded daily at the CME, totaled 343.0 million pounds, up 8.9 million pounds or 2.7% from April, and a whopping 27.3 million or 8.7% above a year ago. YTD Cheddar hit 1.66 billion pounds, up 5.0% from 2020.
Butter churns produced 185.4 million pounds of butter, up 1.5 million pounds or 0.9% from the April volume which was revised down 1.3 million pounds, but was up 13.1 million pounds or 7.6% above a year ago. YTD butter climbed to 964.2 million pounds, still down 3.5% from 2020.
Yogurt output totaled 388.7 million pounds, up 4.2% from a year ago, with YTD at 2.0 billion, up 5.4%.
Dry whey totaled 77.7 million pounds, up 3 million pounds or 4.1% from April, but 6.4 million pounds or 7.6% below a year ago. YTD dry whey was at 391.4 million pounds, down 3.6%.
Dry whey stocks crept up to 66.5 million pounds, 6.3 million or 10.4% more than April but 19.7 million or 22.9% below those a year ago.
Nonfat dry milk output climbed to 205.3 million pounds, up 11 million pounds or 5.7% from April, and 48.1 million or 30.6% above a year ago. YTD production was at 980.5 million pounds, up 9.9% from 2020.
Stocks jumped to 347.8 million pounds, up 30 million pounds or 9.5% from April and 9 million pounds or 2.7% above a year ago.
Skim milk powder production fell to 35.7 million pounds, down 11.3 million pounds or 24.0% from April and 21 million pounds or 37.0% below a year ago. YTD skim milk powder, at 189.9 million pounds, was down 22.2% from 2020.
Dairy product prices started July with cheese climbing and powder, whey, and butter dropping. The holiday-shortened week saw the Cheddar blocks climb to $1.7250 per pound despite the downfall at the GDT, up 17 cents on the week and the highest since May 13, but were priced $1.19 below a year ago.
The barrels got to $1.58, 8 cents higher on the week, highest since June 16, but 76 cents below a year ago, and 14.50 cents below the blocks. 10 cars of block found new homes on the week at the CME and 30 of barrel.
StoneX stated in its July 8 Early Morning Update; “It is possible that exports done 4-8 weeks ago and not yet accounted for in data was stronger than expected. But because of the shipping issues faced this year, it’s possible that some of the cheese held in storage in second quarter was spoken for by international buyers but unable to get shipped in a timely manner. Only time will tell.”
Midwest cheese producers tell Dairy Market News that milk availability is “sloppy.” Discounts remain steep on spot milk, thus plants are running busy schedules. Cheese demand is “somewhat busy” and inventories are tighter. Some plants were running six or seven day schedules and still unable to fulfill extra orders. Cheddar, processed cheese, and curd demand was strong and market tones are getting a lift, as well. Labor shortages in upper Midwest plants however have become a concern and have begun to affect output, says DMN.
Cheese demand at retail and food service markets held steady in the West this week and purchasing for international markets was steady, with notably strong demand from Asian markets. Exports continued to face delays due to limited vessel space and port congestion. Milk continues to be readily available in the west, despite the high temperatures, while producers are running at or near capacity, according to DMN.
Butter held at $1.74 per pound for four consecutive sessions, but closed Friday at $1.6750, down 6.50 cents on the week, lowest since March 22, and 1.50 cents below a year ago. There were 13 sales on the week at the CME.
Butter plant managers are beginning to report a tighter cream market is upon them. Cream is still available at similar multiples to the previous week but not at the same volume. Butter demand is at seasonal expectations. Retail is unchanged but somewhat slow. Food service is much better than a year ago but varies week to week. Market tones are “quiet,” says DMN.
Cream was a bit tighter in the West this week, although demand is generally said to be a little lower as well, due to holiday plant closures on Monday. Some manufacturers were running more active schedules this week following unplanned changes the previous week. Some plants that were counting on a full week of churning the previous week had to pause production due to the heat, so they are trying to make up for that down time. Bulk inventories are stable to growing. Retail demand is steady, albeit seasonally lower. Food service orders are strong but are reported to have plateaued. Export demand is stable, but port congestion and related shipping delays persist. Warehouses are congested.
Grade A nonfat dry milk fell to $1.2250 per pound Thursday, lowest since April 16, but closed Friday at $1.25, 0.75 cents lower on the week but 23.50 cents above a year ago, with 3 sales reported on the week.
Dry whey fell to 48.75 cents per pound Thursday, lowest CME price since January 6, but closed Friday at 50.75 cents per pound, 4.25 cents lower on the week but 22 cents above a year ago. There were 4 sales for the short week.
A year ago, the whey had dropped below 30 cents per pound but the July 8 Daily Dairy Report (DDR) points out that “Bargain pricing and the world’s growing appetite for protein quickly lifted whey out of the doldrums.”
It set a record 70.25 cents per pound on April 20 but quickly retreated and held in the mid-60 cent range. The DDR suggests domestic demand will likely perk up with the lower prices but if it doesn’t, “whey values could contribute much less to second-half Class III prices than they did in the first six months of the year.”
Dairy margins deteriorated further the last half of June as continued weakness in milk prices combined with renewed strength in feed markets to pressure forward profitability, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
“A combination of bearish Milk Production and Cold Storage reports weighed on milk prices,” the MW explained. “USDA pegged May Milk output at a record high 19.85 billion pounds, up 4.6% from last year and 4.2% higher than 2019 given all the Covid-19 disruptions at this time a year ago. The May dairy cow herd at 9.505 million head was up 5,000 from April and 145,000 higher than last year and the largest year over-year gain since 2008. The dairy herd is also the highest it has been since 1994, with April’s herd size revised up by 26,000 cows as well.”
“Cold Storage stocks are growing also as increased foodservice demand is not keeping pace with the sharper rise in milk production,” according to the MW. “USDA reported cheese inventories at the end of May totaled 1.465 billion pounds, up 16.6 million pounds or 1.1% from April and butter inventories of 401.8 million pounds were up 15.6 million pounds or 4.1% from the prior month and the first time that butter stocks have eclipsed 400 million pounds in May since 1993.”
“On the feed side of the margin equation, USDA released the updated acreage and Quarterly Stocks reports, both which were considered bullish for the corn and soybean meal markets,” the MW warned. “Corn acreage at 92.69 million was up 1.55 million from the March Intentions at 91.14 million but below the average expectation of a 2.64 million acre increase. June 1 corn stocks, of 4.112 billion bushels, were 92 million below the average expectation although both within the range of estimates. The soybean figures likewise had a bullish skew relative to industry estimates,” the MW concluded.
Good rains over the 4th of July weekend and a wetter outlook for key western areas of the corn-belt lowered grain markets. This week’s Crop Progress report showed 64% of the corn crop was rated good to excellent, as of the week ending July 4, unchanged from the previous week, but 7% below a year ago.
In soybeans; 29% were blooming, even with a year ago but 5% ahead of the five year average. 59% were rated good to excellent, down from 71% a year ago.
In the week ending July 26, 55,800 dairy cows were sent to slaughter, up 2,600 from the previous week and 4,100 or 7.9% above that week a year ago.
Cooperatives Working Together (CWT) member cooperatives accepted 19 offers of export assistance this week to help capture sales of 2.4 million pounds of cheese, 606,271 pounds of cream cheese, 231,485 pounds of anhydrous milkfat, 55,116 pounds of butter and 220,462 pounds of whole milk powder.
The product is going to customers in the Middle East, Asia, South America and Oceania through November and raised CWT 2021 exports to 25.5 million pounds of American-type cheeses, 11.2 million pounds of butter (82% milkfat), 7.3 million pounds of anhydrous milkfat, 17.2 million pounds of whole milk powder, and 7.9 million pounds of cream cheese. The products are going to 26 countries and are the equivalent of 872.6 million pounds of milk on a milkfat basis, according to the CWT.
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.