The Cheddar blocks started last week falling to $1.4725 per pound but closed Friday at $1.49, down a quarter-cent on the week and $1.0850 below a year ago.
After plunging 13 cents the previous week, the barrels rolled to $1.47 per pound last Tuesday, lowest since March 26, climbed back to $1.50 Thursday, but also finished Friday at $1.49, down 5.25 cents on the week, 91 cents below a year ago, but no longer atop the blocks. There were 4 sales of block reported on the week and 24 of barrel.
The blocks were up 2.50 cents Monday on a trade and added 2.75 cents Tuesday on a trade, hitting $1.5425, highest since May 27.
The barrels eased back 0.50 cents Monday, with 13 cars exchanging hands, but gained 2 cents Tuesday on 4 unfilled bids, hitting $1.5050 per pound, a more normal 3.75 cents below the blocks.
Any expectations of lighter milk supplies in the Midwest due to the heat are yet to be met, says Dairy Market News, and cheesemakers reported even steeper discounts on spot milk. Cheese output is active but demand is mixed. Inventories are growing and buyers “see the near-term writing on the wall, as market prices continue to struggle,” writes DMN, but a restoration of the block-over-barrel price is viewed as an indicator of stability.
Demand for cheese in the West was steady to lower across both foodservice and retail markets. Contacts reported that pricing remains favorable in international markets. Milk is plentiful in the region, allowing producers to run full schedules, but delays in transportation due to a shortage of truck drivers is, reportedly, causing warehouse inventories to build, according to DMN.
Spot butter fell to a Friday close at $1.7175 per pound, 6.75 cents lower on the week and 4.75 cents below a year ago, with 14 cars exchanging hands.
Monday’s butter jumped a nickel on 4 sales but then gave back 0.25 cents Tuesday, with 15 loads finding new homes, and slipping to $1.7650.
Central butter production remains steady though cream availability is spottier and Western cream availability is tightening quite quickly, according to some. Retail butter sales are in their early summer lull, but foodservice interest remains steady.
Cream is available in the West. Ice cream production is flat to strong but butter plants are receiving steady supplies of cream. Butter output is seasonally active. Some report that supply chain issues are driving up prices of packaging items, like boxes and bags. Butter makers are not happy absorbing the extra costs but the supply chain snags are not reported to be disrupting production. Inventories are growing and ready for fall demand, says DMN. Retail sales are soft but steady and foodservice demand remains strong.
Grade A Nonfat dry milk closed Friday at $1.2650 per pound, unchanged on the week but 24.50 cents above a year ago; 19 sales were reported last week.
The powder was up 1.50 cents Monday but fell back a penny Tuesday, to $1.27.
Dry whey saw a Friday finish at 57.75 cents per pound, down 3.25 cents on the week but 26.50 cents above a year ago, with 2 sales reported for the week.
Western weather woes
Record breaking blistering heat is covering the Pacific Northwest and lower mainland of British Columbia, Canada, this week, causing temperatures to soar over 100 degrees, a rare sight for this part of the USA, and one termed a “heat dome” seen once every 1,000 years. The heat extends south into Oregon and California and is drawing attention to what its effects will be on the dairy industry, especially as it awaits Wednesday afternoon’s Grain Stocks report.
StoneX Dairy reported in its June 28 Early Morning Update that “heavy rains fell over the weekend from the southern Plains (Oklahoma and Texas) up through Missouri, Illinois and the northeastern Corn Belt; some decent amounts fell in northern Iowa and southern Minnesota as well, into Wisconsin, though the lightest coverage again came for the Dakotas and western Minnesota.” Unfortunately the rains did not extend into the much-needed areas in the northeast belt where moisture deﬁcits are higher.
Dairy cow culling dropped below the previous month and year in May. The USDA’s latest Livestock Slaughter report shows an estimated 223,400 head were sent to slaughter under federal inspection, down 34,100 head from April and 9,900 or 4.2% below May 2020. Culling in the first five months of 2021 totaled 1.3 million head, down 39,700 or 2.9% from the same period a year ago.
In the week ending June 12, 52,600 dairy cows were sent to slaughter, up 6,100 from the previous week and 700 or 1.3% above that week a year ago.
Abundant supply, demand
There is plenty of uncertainty in the markets and even as concern was mounting in the U.S. over growing inflation, the U.S. dollar strengthened considerably, which is not a good sign for exports, especially powder.
Milk production typically peaks at this time of year but StoneX reminds us that component levels typically fall. Components are indeed following seasonal trends but “we are seeing levels at a surplus to where they stood at this time over the last couple of years. High volume as well as higher than normal component percentages means we can stretch an already ample supply of milk even further to meet production demands.”
Thankfully, consumers are chewing through a lot of dairy products. Matt Gould, editor and analyst of the Dairy and Food Market Analyst, reported details in the June 21 “Dairy Radio Now” broadcast, crediting foodservice sales shooting higher as we reopened our country from the COVID-driven disaster of a year ago, even though retail sales have fallen some. Global sales also did well, he said, in part from Asian countries and their belief that dairy products help improve immunity.
Disappearance comparisons to a year ago may seem a little out of whack, he said, because last year people were going to grocery stores instead of restaurants but, starting with butter, in the three months ending in April, sales were up about 2% from a year ago and up 13% compared to two years ago.
Cheese had a similar story. American type cheese was up 8%, compared to a year ago and up 6% from two years ago as restaurants were reopening and stocking up on dairy products.
At the same time, U.S. exports have been phenomenal, seeing the highest levels in years, if not record highs, on whey and milk powder. Whey exports the past three months were up 28% from a year ago, as was skim milk powder, he said.