2019 Milk Production Forecast Unchanged; Cheese Prices Higher
Published: Friday, July 19, 2019
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department left its 2019 milk production estimate in the latest World Agricultural Supply and Demand Estimates (WASDE) report unchanged from last month, ending seven consecutive reductions. It reduced the 2020 forecast due to slower expected growth in milk per cow. The report also stated that USDA's Cattle report, to be released July 19, will provide a mid-year estimate of the dairy cow inventory and producer intentions regarding retention of heifers for dairy cow replacement.
2019 production and marketings remain estimated at 218.2 and 217.2 billion pounds, respectively, unchanged from last month's estimate. If realized, 2019 production would be up just 600 million pounds, or .3 percent, from 2018.
2020 production and marketings are estimated at 221.8 and 220.8 billion pounds, respectively, down 100 million pounds on both from last month. If realized, 2020 milk production would be up 3.6 billion pounds, or 1.6 percent, from 2019.
Fat basis import forecasts for 2019 and 2020 were raised from last month on higher expected imports of butterfat products. Fat basis exports for 2019 were reduced on slower expected shipments of butterfat products. The 2020 fat basis export forecast was also reduced on expectations that U.S. butter exports will continue to be less competitive globally.
Skim solids basis import forecasts for 2019 and 2020 were unchanged. However, skim-solids basis exports for 2019 and 2020 were reduced from the previous month on lower exports of lactose, whey products and other dairy products.
The 2019 cheese and nonfat dry milk (NDM) price forecasts were increased from last month while butter and whey price forecasts were reduced. The 2020 cheese price forecast was raised fractionally as demand is expected to improve, but the butter price forecast was lowered. The whey price forecast was also reduced as export prospects remain relatively weak. The NDM price forecast was unchanged.
The 2019 Class III milk price forecast was raised as the higher cheese price more than offsets a lower whey price. Look for the Class III to average about $16.05 per hundredweight in 2019, up 15 cents from last month's projection, and compares to a 2018 average of $14.61 and $16.17 in 2017. The 2020 average was put at $16.65, unchanged from last month's projection, as the fractionally higher cheese price is offset by a lower expected whey price.
The Class IV price was raised as a higher NDM price more than offsets the lower butter price. It is expected to average $16.45 per hundredweight up a nickel from last month's estimate and compares to $14.23 in 2018 and $15.16 in 2017. The 2020 Class IV forecast was lowered a dime to $16.75, reflecting a lower butter price.
While the earth shook a bit in Seattle and the Pacific Northwest last Friday, cheese prices at the Chicago Mercantile Exchange did a little shaking as well. The Cheddar blocks, having hit the highest level since November 2016 on July 1, closed last Friday at $1.7850, down 4½ cents on the day and 6¼ cents on the week, but were still 22½ cents above a year ago.
The barrels, after hitting $1.79 on June 28, also the highest since November 2016, closed July 12 at $1.74, 4 cents lower on the week, 31¾ cents above a year ago, and a more typical 4½ cents below the blocks. Twenty-three cars of block were traded on the week at the CME and 34 of barrel.
Midwest cheesemakers suggest the milk supply may be tightening, according to Dairy Market News. While there is still plenty of milk for cheese vats, there does not seem to be an abundance of spot milk offers, and holiday offers were less available than in previous years. Cheesemakers understand milk intakes and components may slide lower as heat and humidity issue into the Upper Midwest. Crop and forage concerns, and the exodus of more dairy farms from the industry, may compel manufacturers to work harder in finding extra milk later in the year. Manufacturers are running facilities at or near full schedules with cheese orders to fill. Cheese stocks are adequate to meet most needs, but processors want to stay ahead of late season demand.
The grilling season is on in the West as temperatures warm and cheese sales remain active. Contacts report that with current strong domestic prices, it's harder to attract more international buyers. A new free trade treaty between the Mercosur countries and the European Union could impact the international cheese market moving forward. Cheese manufacturing is busier for some western producers and stable for others. Class III milk prices are flat and supplies are available. Cheese inventories are plentiful, with "a lot of Mozzarella in warehouses."
Butter started the week with some slippage but ended at $2.4125 per pound, up three-quarter cents and 18¾ cents above a year ago, on nine sales for the week.
Butter manufacturing in the Central region is steadily slowing as cream volumes are less available, according to DMN. Cream pulls from Class II, especially ice cream makers are strong. Bulk and print butter demands from grocery stores, wholesalers and restaurants are reported as fair to good. With summer season in full swing and milk butterfat levels at the lowest level of the year, the butter market is expected to firm, according to some processors.
Butter manufacturing in the West has returned to normal following the holiday week. Churning is proceeding with the available cream, but some butter makers say production is lower than expected. Retail bids are steady and solid, but a few manufacturers are trying to hold back on shipments as they would like to see a little more cushion in available butter stocks before releasing print butter. Some manufacturers are seeing stronger than usual demand and anticipate this interest to grow as more confectionary customers ramp up activities later this summer.
Spot nonfat dry milk closed 1¼ cents lower on the week at $1.0275, lowest since April 24, but 27¼ cents above a year ago. Seven cars were sold on the week.
Interestingly, while U.S. cheese and butter prices are the highest in the world, U.S. powder is the lowest.
Dry whey closed last Friday at 32¼ cents per pound, down a half-cent on the week and 9½ cents below a year ago, with five sales reported on the week at the CME.
FC Stone reported in its July 9 Early Morning Update
Return to Top of Page