The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. exports in November totaled just $377.3 million, down 24 percent from the previous year, and the lowest figure in nearly five years, reports the U.S. Dairy Export Council's Alan Levitt in his first blog of 2016. "Shipments of nonfat dry milk/skim milk powder (NDM/SMP) and lactose continued to track slightly higher than the previous year, but cheese and whey exports have fallen into a lower gear, and sales of butterfat, WMP and MPC have dwindled to negligible levels," he said.
Exporters moved 42,602 tons of NDM/SMP in November, up 1 percent from 2014. This brought the year-to-date total to 513,536 tons, slightly ahead of 2014's pace. Almost half of November sales went to Mexico (21,273 tons). Exports to Peru were a record 2,370 tons. Sales to Southeast Asia were up 14 percent, but year-to-date shipments were still off 12 percent from 2014.
Cheese exports were 22,895 tons, down 7 percent from prior year. Volume has now trailed year-ago levels for 14 straight months, according to Levitt. Shipments to Mexico were up 5 percent, but this was more than offset by sales declines to South Korea (down 35 percent) and Japan (down 20 percent).
Whey exports totaled just 30,308 tons, the lowest since July 2010. In the last three months, dry whey exports averaged less than 12,000 tons per month, a significant drop from the pace of the previous four years, when dry whey exports averaged nearly 20,000 tons per month. The 2015 dry whey exports will be the lowest since 2004, according to USDEC.
Back home, California's December 4b cheese milk price dropped to the lowest level since January 2011, at $12.90 per hundredweight, down $1.53 from November, $1.88 below December 2014, and $1.54 below the comparable Federal Order Class III price. That's despite the temporary price adjustment mandated by the California Department of Food and Agriculture.
The 4b price has lagged the Federal Order Class III from as little as 53 cents per hundredweight in August to as much as $2.43 in January, fueling the effort to form a California federal order. Last year the price difference varied from as little as 84 cents in January to a high of $3.24 in November. The 2015 4b average is $14.47, down from $19.93 in 2014 and $16.42 in 2013, and compares to a 2015 average of $15.80 in the federal order.
The Agriculture Department's latest National Milk Cost of Production report shows November's total costs were down from October and November 2014. Total feed costs averaged $11.19 per hundredweight, down 72 cents from September, down 64 cents from October, and $1.92 below November 2014. Purchased feed costs, at $6.01 per hundredweight, were down 71 cents from the September level, down 50 cents from October, and $1.30 below November 2014.
Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $23.20 per hundredweight, were down 59 cents from September, down 68 cents from October, and $1.76 below a year ago. Feed costs made up 48.2 percent of total costs in November down from 49.5 percent the month before and down from 52.5 percent a year ago.
The first Global Dairy Trade auction of 2016 reversed gears after two previous sessions of gain and the weighted average for all products offered Jan. 5 dropped 1.6 percent, following a 1.9 percent gain Dec. 15 and a 3.6 percent rise in the Dec. 1 event.
The losses were led by whole milk powder, down 4.4 percent, following a 1.8 percent gain Dec. 15. Anhydrous milkfat followed, down 2.7 percent, after gaining 6.1 percent last time, and skim milk powder was down .8 percent, after inching .2 percent lower last time.
The gains were led by lactose, up 11.4 percent, after rising 6.8 percent last time. Butter was next, up 6.7 percent, after jumping 9 percent in the last event. Rennet casein was up 3.9 percent, after plunging 9.5 percent, and Cheddar cheese was close behind, up 3.5 percent, after inching 1.1 percent higher last time.
FC Stone reports the average GDT butter price equated to about $1.5030 per pound U.S., up from $1.4226 in the Dec. 15 event. Contrast that to CME butter which closed last Friday at $2.0350 per pound. GDT Cheddar cheese equated to about $1.3442 per pound U.S., up from $1.2955 last time, and compares to last Friday's CME block Cheddar at $1.46. GDT skim milk powder, at 85.73 cents per pound U.S., is down from 85.77 cents last time, and the whole milk powder average, at $1.0023 per pound U.S., is down from $1.0453 per pound in the last event. CME Grade A nonfat dry milk price closed at 73¼ cents per pound.
Cheese, Butter Prices Dip
Cash dairy product prices took some early New Year losses in the first full week of 2016 and Class III futures erased all levels above $16 per hundredweight. The peak, as of last Thursday's settlements, fell to just $15.95 in October. There was a great deal of uncertainty in markets this week. Global stocks tumbled lower after Chinese stock market trading was suspended for the second time this week, following a 7 percent decline.
The Cheddar blocks closed last Friday Jan. 8 at $1.46 per pound, down 4¾ cents on the week and 13 cents below a year ago. The Cheddar barrels finished at $1.54, up a penny on the week, a half-cent below a year ago, and 8 cents above the blocks. Two cars of block traded hands this week and nine of barrel.
Midwest cheese manufacturers are resuming regular schedules following the holidays, according to Dairy Market News. Production is active with discounted milk available into next week. Although having Christmas and New Years on Friday this year cut into restaurant sales, cheese makers say food service demand has been relatively good. Domestic retail demand is also strong. Mozzarella demand is picking up as pizza companies resume production and push a little more in advance of the football playoffs and Super Bowl.
With the major winter holidays passed and many school sessions resuming, some additional milk is being diverted into bottling. Western milk is also readily available and manufacturers are choosing to make cheese with it. Cheese demand has remained relatively good but inventories are building, DMN says.
Spot butter saw more meltdown, but it inched back up a quarter-cent last Friday, to close at $2.0350 per pound, down 4½ cents on the week but 49½ cents above a year ago. Twenty-one cars traded hands on the week at the CME.
Butter production in the Central region is active, according to DMN. Cream is plentiful and with additional milk clearing into bottled uses, higher cream volumes are spinning off of standardizing operations. Butter manufacturers report interest is flat to lower from retailers, but food service demand is steady. There is some concern that first quarter needs were prefilled in December when prices were lower thus, new butter sales may lag in early 2016, DMN warned.
Western butter makers felt less urgency to make butter now that the holidays have passed. Production is still active, but has slowed to match the reduced, post-holiday, domestic butter demand.
Cash Grade A nonfat dry milk closed last Friday at 73¼ cents per pound, down 2¼ cents on the week and 26¾ cents below a year ago, with 13 carloads traded at the CME.