All products offered were in the black except buttermilk powder, which was off 0.3%. The average winning price was $4,231 U.S., up from $3,746 on Feb. 16, and traders brought 56.3 million pounds of product to the event, down from 59.3 million on Feb. 16, and the smallest offering since July 21, 2020.
Gains were again led by whole milk powder, up 21.0%, following a 4.3% rise last time. Skim milk powder was up 3.5%, after inching up 0.3% on Feb. 16. GDT butter was up 13.7%, after a 2% gain last time, and anhydrous milkfat was up 7.4%, following a 1.1% gain. GDT Cheddar was up 1.3%, after climbing 2.4%.
StoneX Group says the GDT 80% butterfat butter price equates to $2.5780 per pound U.S., up 30.8 cents from the last event, and compares to CME butter, which shot up to a Tuesday close at a bargain basement $1.7150.
GDT Cheddar equated to $1.9415 per pound, up 5.8 cents, and compares to Tuesday’s CME block Cheddar at $1.63. GDT skim milk powder averaged $1.4976 per pound, up from $1.4548, and whole milk powder averaged $1.9795 per pound, up from $1.64. CME Grade A nonfat dry milk closed Tuesday at $1.1750 per pound.
Dairy broker Dave Kurzawski attributed the jump to buying by China, which may be stockpiling or having concerns over shipping container shortages. “The market was simply caught off guard,” he concluded.
Some of last week’s January Milk Production report data showing output was only up 1.6% is suspect, according to Lucas Fuess, director of dairy market intelligence for HighGround Dairy (HGD).
Speaking on the March 1 “Dairy Radio Now” broadcast, Fuess said most analysts were expecting something like a 3% gain, comparable to what was seen in November and December, so the smaller gain was bullish.
At issue, California output was reportedly down 0.7% from a year ago and December’s total was revised 77 million pounds lower, resulting in a 0.5% drop from December 2019, instead of the originally reported 3.2% increase.
The downward revisions in the California data is questionable, Fuess charged, and not consistent with what farmers and processors in the region have been saying. He believes the data will be revised in the February report.
California aside, Fuess pointed to the growth in the upper Midwest, particularly Wisconsin, Minnesota, and especially Michigan, which saw an all-time record high in January milk output. Fuess said he expects a strong spring flush.
The Cold Storage report was welcomed by the cheese market, according to Fuess, because natural American stocks declined slightly in January versus December, when the growth was ten times the norm. He said, “It was a relief that stocks did not surge into the new year” and the decline indicates demand was strong into January, especially considering American production was likely high.
The growth in butter stocks was expected, he concluded, and “we will have significant volumes of butter in storage by spring and that will fundamentally weigh on prices throughout the remainder of the year.
Prices seek direction
Dairy traders had a lot to absorb from last week’s USDA reports and appeared to respond positively but then reversed. The Cheddar blocks climbed to $1.66 per pound by last Thursday but they closed Friday at $1.6175, still up 8 cents on the week but 10.50 cents below a year ago and 3.50 cents above where they were on Feb. 1.
The barrels dipped to $1.3825 last Tuesday, lowest since Aug. 24, 2020, then gained 6.50 cents Thursday, but closed Friday at $1.42, up 0.75 cents on the week, 17 cents below a year ago, and 3 cents above their Feb. 1 perch.
There were 17 cars of block traded last week at the CME and 59 in the month of February, down from 62 in January. Barrel sales numbered 6 for the week and 75 for the month, down from 98 in January.
The first day of trading in March took the blocks up 0.75 cents, as traders absorbed the morning’s GDT and anticipated the January Dairy Products report on Thursday. They ticked up another 0.50 cents Tuesday, and hit $1.63.
The barrels were unchanged Monday and Tuesday, holding at $1.42, 21 cents below the blocks.
StoneX’s Feb. 25 Early Morning Update stated that “food boxes are expected to pick up delivery and provide opportunity for more sales. Recent government purchases have been in-line with solicitations. These sales numbers along with recent USDA fundamentals lead us to believe that we could see a short-term bounce in the market.”
Midwestern cheesemakers report that retail and some restaurant customer bases are “somewhat active.” Spot milk availability has tightened. Discounts were reported near the previous week’s mid-point but prices of $2 under Class III were among them. Contacts suggest this could be due to more milk loads being spread out to refill depleted pipelines in the southern portion of the country, following the havoc of the winter storms the previous week.
Cheese market tones are “somewhat muted,” says DMN. “There are a number of questions as to which direction markets will follow, including the potential of further government awards, retail/foodservice replenishment after most areas of the country begin to warm up, and continuously increasing milk availability moving into spring.”
Western cheese makers say foodservice demand has yet to return, even as COVID restrictions relax. Retail sales are above previous year levels but “a bit lackluster.” Export demand is present but the challenges within the ports and transport channels due to container shortages make shipping difficult.
Butter, after two weeks of gain, lost ground the last week of February, closing Friday and the month at $1.47 per pound, down 8 cents on the week, 25.50 cents below a year ago, but 26 cents above where it was on Feb. 1; 16 cars were sold on the week and 59 for the month, down from 63 in January.
Monday, the first day of trading new crop butter, saw the price skyrocket 18 cents to $1.65 per pound on 1 trade. A second trade backed it down to $1.63, with a third and final sale of the day at $1.6350. It gained 8 cents Tuesday and hit $1.7150, highest since July 27, 2020.
Butter producers tell DMN that cream offers were plentiful as suppliers moved cream from areas hit hardest by the storms. Cream accessibility was already steady in the Midwest and West for most of the year. Plants are churning full bore throughout the region. DMN says domestic bulk butter demand is stepping up and traders report a strong interest from export markets for unsalted butter.
There’s plenty of cream in the West to deal with as well and butter production is running heavy to produce the new crop butter needed by customers for the next few months. Retail sales are strong as shoppers look to fill store shelves ahead of the spring holiday baking season.
Grade A nonfat dry milk saw a Friday close at $1.1325 per pound, 4 cents higher on the week, 6.75 cents above a year ago when the powder dropped 10.50 cents, but was 2 below its Feb. 1 mark. There were 27 sales reported last week and 120 for the month, down from 140 in January.
The powder gained a penny Monday, on 16 trades, and moved up 3.25 cents Tuesday on 12 more trades, to $1.1750, highest since Jan. 21, 2021.
From a global perspective, both nonfat dry milk and butter are attractively priced, says StoneX. “The issue is around logistics of moving the product. Lack of shipping containers and resulting increased shipping costs are not resolved issues, but for now likely priced into markets.”
CME dry whey finished February at 55.75 cents per pound, up a penny on the week, 21.75 cents above a year ago, and 2.25 cents above the Feb. 1 closing. There were 2 sales on the week and 7 for the month, down from 15 in January.
The whey was unchanged Monday but was up 0.75 cents Tuesday, to 56.50 cents per pound, highest since Oct. 19, 2018.
Culling lags year ago
Dairy cow culling was up in January from December but lagged a year ago, according to the latest Livestock Slaughter report. The USDA reported an estimated 277,300 head were sent to slaughter under federal inspection, up 3,800 head from December but 21,200 or 7.1% below January 2020.
One of the measures of dairy farm profitability continues to slip, as milk prices fall and feed costs continue to rise. The USDA’s latest Ag Prices report shows the January milk-feed ratio at 1.98, down from 2.18 in December, down from 2.42 in January 2020, and the lowest since May 2020’s 1.77.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, 1 pound of milk could only purchase 1.98 pounds of dairy feed of that blend in January.
The U.S. All-Milk price averaged $17.50 per hundredweight, down $1 from December and $2.10 below the January 2020 average.
California’s All Milk price fell to $18.40 per cwt., down 80 cents from December and $1 below a year ago. Wisconsin’s, at $17.50, was down $1 from December and $2.10 below a year ago.
The national average corn price climbed to $4.24 per bushel, up 27 cents per bushel from December, which followed an 18 cent rise the month before, and was priced 45 cents per bushel above January 2020.
Soybeans averaged $10.90 per bushel, up 40 cents from November, which followed a 20 cent rise from November. Soybeans were a whopping $2.06 per bushel above January 2020. Alfalfa hay averaged $171 per ton, up $2 from both December and a year ago.
The January cull price for beef and dairy combined averaged $59.70 per cwt., up $1.60 from December, $1.70 below January 2020, and $11.90 below the 2011 base average of $71.60 per cwt.