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Putin proposed adding limits to the Ukraine grain export deal

Cash U.S. butter set a new record high in the Labor Day holiday shortened week, with one sale Friday soaring to $3.1825 per pound. It closed at $3.17, up seven cents on the week, besting the September 25, 2015 record by 3.50 cents and is $1.3850 above that week a year ago. There were 17 sales reported on the week at the CME.

StoneX reminds us that the 2015 record lasted for just one day. Three days later the price had dropped by 51 cents, to $2.6250. That obviously didn’t happen this week, but their warning remains, “Big prices can result in big price swings.”

Butter manufacturers tell Dairy Market News that most things at the operational level are unchanged despite the record high prices. Butter demand is steady. “Customers are hesitant, but markets have shown few signs of backsliding coming into the busiest butter season of the year.” Global values of butter are notably lower than domestic values but are starting to pivot upward as well. Questions remain as to large scale end users looking at freight availability and cost differentials of bringing in butter from New Zealand. 

High temperatures in the West are lowering farm milk production and component content. Demand for cream is steady to lighter, as some class II producers are running lighter schedules. Cream inventories remain tight, though some contacts reported increased availability this week. Butter churns are active. Some plant managers say limited tanker availability and labor shortages are preventing them from increasing output. Demand for butter is unchanged in retail and food service markets. Bulk sales are strong and inventories remain tight. Some contacts are limiting deliveries to customers to help fulfill near term commitments.

The CME cheddar blocks closed Friday at $1.9175 per pound, up 15.25 cents on the week, highest since July 27 and 12.75 cents above a year ago. The barrel’s Friday finish was at $1.9325, 0.75 cents higher on the week, 45.50 cents above a year ago and just 1.50 cents above the blocks. Sales totaled three cars of each.

Midwestern cheesemakers reported “off kilter buying” due to the price inversion as barrels hold a premium to the blocks. Most cheesemakers say business is steady or picking up. Some continue to be behind on orders and are limiting them. Milk availability at mid-week was somewhat different than other holiday shortened weeks, as spot milk discounts were not being offered, says DMN.

Western retail cheese demand was unchanged in domestic markets. Food service is trending higher with increased mozzarella sales to pizza makers. 

Domestically produced cheese is competitively priced for international markets and contacts say this is contributing to strong demand. Cheese makers are running near capacity, though some plants reported lighter output due to continuing labor shortages and delayed deliveries of production supplies.

Grade A nonfat dry milk closed at $1.5750 per pound Friday, up 5.50 cents on the week and 21.75 cents above a year ago. There were 34 sales on the week.

Dry whey closed the week at 45.75 cents per pound, 0.75 cents lower and 7.25 cents below a year ago, with nine sales reported on the week at the CME.

This week’s global dairy trade auction reversed five consecutive drops in its weighted average, jumping 4.9%, highest gain since March 1, a period that saw 10 sessions of loss to only three gains. Traders brought 59.8 million pounds of product to market, down from 66.9 million on August 16. The average metric ton price climbed to $4,007 U.S. per metric ton, up from $3,768.00.

The ascent was led by anhydrous milkfat, up 13.9%, after leading the declines last time with a 9.8% drop. Butter was up 3.3% following a 0.2% gain. Whole milk powder was up 5.1% after dropping 3.5% in the last GDT and its average was up $195 per metric ton from the last pulse event. Skim milk powder was up 1.5% after inching 0.1% higher. Cheddar was up 1%, following a 4.2% rise. Buttermilk powder was the only decline, down 5.1%. It did not trade in the last event.

StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.376 per pound U.S., up 7.3 cents from the last event and compares to CME butter which closed Friday at what is likely a world high $3.17 per pound. GDT cheddar, at $2.2889, was up 1.9 cents and compares to Friday’s CME block cheddar at a bargain $1.9175. GDT skim milk powder averaged $1.6215 per pound, up from $1.5984 and whole milk powder averaged $1.6374 per pound, up from $1.55. CME grade A nonfat closed Friday at $1.5750 per pound.

North Asia’s market share was “abysmal” in this event, reported StoneX and the lowest value since March of 2020, falling well below both the last event and year ago levels, thanks primarily to China. Southeast Asia, Middle East and Europe picked up purchases, bringing their market share levels higher than year ago levels as well as the last event.

China has implemented yet another zero COVID lockdown, this time in Chengdu, another of the country’s biggest cities, putting future dairy purchases in limbo.

Meanwhile, July U.S. dairy exports continued to impress. HighGround Dairy’s (HGD) Lucas Fuess reported details in the September 12 Dairy Radio Now broadcast. 

Butter exports saw the biggest gain, up 77.7% from July 2021. Volume only totaled 13.4 million pounds, small compared to domestic usage, Fuess said, but impressive nonetheless. The July total was the highest since March and the largest July shipments since 2013. Top destinations included Canada, Bahrain and South Korea. Butter exports are up 31.7% year to date. 

July butter imports grew to a record 12 million pounds, up 51% from a year ago, with year to date up 10.9%, as the high U.S. price acts as a magnet for imports that may bring prices back down, but those imports be needed to satisfy domestic demand.

Cheese exports totaled 82.2 million pounds, up 1.6%, but topped those of a year ago for the thirteenth consecutive month and the strongest July on record, says HGD. 

Mexico remained the top destination and saw the largest year over year gain of any country, up 17%, with a 31% market share, according to HGD. South Korea was the second largest destination, followed by Japan. Cheese imports were down 14.1% from July 2021.

Dry whey exports were up for the second month in a row, totaling 43.3 million pounds, up 11.6%, though year to date they are down 13.9%.

To no one’s surprise, nonfat dry milk shipments were down, coming in at 142.8 million pounds, down 9.7% from last year’s impressive sum, according to Fuess and was the weakest of any month since February. Mexico remained the top powder destination but showed the largest year over year decline, down 14%. Some of the loss was offset by gains to Southeast Asia, according to Fuess, including the Philippines and Indonesia.

Exports continue through the Cooperatives Working Together (CWT). Member cooperatives accepted four offers of export assistance this week that helped them capture sales of 3.2 million pounds of American type cheese. The product is going to customers in Asia, Middle East-North Africa and Oceania through February. 

CWT’s 2022 sales now total 70.1 million pounds of American type cheeses, 459,000 pounds of butter, 29.8 million pounds of whole milk powder and 7.1 million pounds of cream cheese. The products were shipped to 18 countries and are the equivalent of 930 million pounds of milk on a milkfat basis.

You’ll recall preliminary USDA data showed July milk production was up 0.2% from July 2021. The July dairy products report shows where that milk went.

July cheese output totaled 1.158 billion pounds, up 0.5% from the June total which was revised down five million pounds, but was up 1.1% from July 2021. Output year to date (year to date) stands at 8.1 billion pounds, up 2.2% from a year ago.

Wisconsin produced 289.7 million pounds of the July total, up 0.3% from June but 1.2% below a year ago. California vats produced 208 million pounds, up 2.2% from June and 2.5% more than a year ago. Idaho contributed 85.8 million pounds, up 1.9% from June, but 0.5% below a year ago. 

Wisconsin remains the biggest cheese producer followed by California, then Idaho, New Mexico, New York, Minnesota, Pennsylvania, Iowa, Ohio and Vermont.

Italian cheese output totaled 491.5 million pounds, up 1.9% from June and 2.3% above a year ago. Year to date Italian stands at 3.4 billion pounds, up 3.3%.

American type cheese totaled 467.9 million pounds, up 1.5% from June and 0.1% above a year ago. Year to date output at 3.3 billion pounds is down 0.1%.

Mozzarella output jumped to 393.3 million pounds, up 5% from a year ago, with year to date at 2.7 billion pounds, up 4.3%.

Cheddar production, the cheese traded at the CME, slipped to 331.6 million pounds, down five million pounds or 1.5% from the June total, which was revised up 3.1 million. It was also up 6.6 million pounds or 2% from July 2021. Year to date cheddar is at 2.3 billion pounds, down 1.7% from a year ago.

July butter totaled 151.7 million pounds, down 8.5 million pounds or 5.3% from June, but up 4.6 million or 3.1% from a year ago. Year to date butter output is at 1.25 billion pounds, down 2.2% from a year ago. 

Keep in mind, butter stocks in July were down over 82 million pounds or 20.1% from a year ago. There’s a reason butter prices are where they are. 

Yogurt output totaled 377.2 million pounds, down 6% from a year ago, with year to date output at 2.7 billion pounds, down 3.2%.

The strong cheese production meant plenty of whey. Dry whey output climbed to 85.7 million pounds, up 5.5 million pounds or 6.9% from June and 4.7 million or 5.8% above a year ago. Year to date whey is at 566.8 million pounds, up 3.1%.

Dry whey stocks totaled 69.4 million pounds, down 300,000 pounds or 0.4% from June but were 2.3 million pounds or 3.4% above those a year ago.

Nonfat dry milk output slipped to 165.7 million pounds, down 3.6 million pounds or 2.1% from June, but was up a hefty 27.9 million pounds or 20.2% from a year ago. Year to date powder was at 1.3 billion pounds, down 4.4%.

Stocks climbed to 336.7 million pounds, up 19.4 million pounds or 6.1% from June and were up 22.9 million pounds or 7.3% above a year ago.

Skim milk powder output hit 50.8 million pounds, up 5.6 million pounds or 12.4% from June, but was down 13.6 million or 21.1% from a year ago. Year to date SMP was at 276.2 million pounds, down 24.9% from 2021. StoneX called the dairy products report “overtly bearish.”

In the week ending August 27, 60,000 dairy cows were sent to slaughter, up 900 head from the previous week, but 1,700 head or 2.8% below a year ago.

The USDA’s latest crop progress report showed 92% of U.S. corn was at the dough stage, as of the week ending September 4, up 6% from the previous week, 2% behind a year ago and 1% behind the five-year average. 63% was dented, 9% behind a year ago and 4% behind the average. 54% was rated good to excellent, 5% behind a year ago.

Checking soybeans, 94% were setting pods, up 3% from the previous week, 2% behind a year ago and 2% behind the five-year average. 57% of the crop was rated good to excellent, mirroring that of a year ago. 

StoneX reported Thursday that Russian President Putin proposed adding limits to the Ukraine grain export deal, threatening to halt all energy supplies to Europe as well. The export agreement is up for renewal in late November and Turkey’s president, who helped orchestrate the deal, echoed Putin’s grain export complaint, looking for Ukraine grain to go to “richer” countries and wanting to facilitate additional Russian exports, according to StoneX.

Speaking of Ukraine, preliminary estimates from dairy officials within the country suggest that dairy has diminished by about 15%, according to DMN. Milk output is seasonally trending lower in all of Eastern Europe, though some of the countries are ahead of last year's output, with war torn Ukraine the exception. 

The Australian forecast indicates flat to moderate growth for the new season, as milk collections began by posting posted a 2.7% decrease compared to July a year ago. Dairy output has fallen every month in the 2021 to 2022 period. Sources suggest that with continued low production and supply shortfalls expected in Australia, the competition between processors has picked up. 

Rain-soaked pastures have thus far accompanied New Zealand's new season, supporting declines in the available dairy commodities. Very wet conditions occurred in the North Island throughout July. Milk collections were down 3.5%. South Island rainfall has been heavy, but July milk collections were up 9.7%.

By all accounts, in July, New Zealand's milk production dropped a massive 5.5%, on volume basis, says DMN, compared to the same period the previous year. As such, the New Zealand 2022 to 2023 milk production forecast at the moment has been downgraded from up 0.4% to minus 2.2% compared to the last season.

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