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Retail Demand Lifting Cheese Prices


by Lee Mielke

Published: Friday, July 10, 2020

The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Week-ly."

CME prices entered National Ice Cream Month stronger, except for butter and powder. The Fourth of July holiday shortened week saw the Cheddar blocks close last Thursday at $2.6750 per pound, up a dime on the week and 82.75 cents above a year ago. The barrels finished at $2.4150, up 1.5 cents, 63.5 cents above a year ago, but 26 cents below the blocks. Twenty cars of were block sold and six of barrel.

Dairy Market News says some Midwestern cheesemakers reported COVID-19 related disruptions regarding cheese production as they finished the month of June. Spot milk prices were coming in below class and "cheesemakers are deciding to, or not to, pro-duce more cheese to add to the spot market." Spot milk availability was opening up early in the week and was expected to last into the weekend and possibly into the following week.

Western cheesemakers report pro-duction is still running at or above design capacity for many. Retail demand has been the "stalwart foundation for the cheese industry over the last few months," said DMN, and "Some speculate that with summer grilling season on hand, and the safer at home mentality still fresh in consumers' minds, demand for single serve slices has been strong."

Earlier this spring, cheese processors aggressively pursued export markets, sell-ing a lot of cheese forward overseas. However, as prices increased, contacts said they were seeing fewer future book-ings. Food service demand has increased and government purchases have made cheese stocks tight. Some brokers are actively looking for cheese to close out existing contracts. But with higher prices, food service demand finding a new balance, and export contracts getting filled, many market participants envision a scenario where cheese availabil-ity may increase, and cheese prices may fall, warned DMN.

Spot butter saw its fourth consecutive week of decline, closing at $1.7375 per pound, down 2.75 cents on the week, lowest since June 3, and 66.75 cents below a year ago. Only four carloads were sold on the week at the CME.

Butter makers found cream prices more within reach as they started July, according to DMN, "but the longevity of churning is in question." Butter de-mand remains strong on the retail side and food service has picked up in recent weeks. However, it still lags previous years' figures by a sizable margin.

Grade A nonfat dry milk weakened, closing last Thursday at $1.01 per pound, down a penny on the week and 3 cents below a year ago, with seven cars sold on the week.

Dry whey saw its last Thursday finish at 33 cents per pound, up 1.75 cents and a quarter-cent above a year ago, with 18 sales re-ported on the week at the CME.

Lower feed costs did not offset a lower All-Milk price and thus the May milk feed price ratio was lower for the sixth month in a row. The latest Ag Prices report put the ratio at 1.77, down from 1.84 in April, and compares to 2.10 in May 2019.

The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk could only purchase 1.77 pounds of dairy feed of that blend in May.

The U.S. All-Milk price averaged $13.60 per hundredweight, down 80 cents from April and $4.40 below May 2019, as falling milk prices resulting from the COVID pandemic find their way to the farm gate.

The national average corn price averaged $3.20 per bushel, down 9 cents per bushel from April and 43 cents per bushel below May 2019. Soybeans averaged $8.28 per bushel, down 7 cents from April but 26 cents per bushel above a year ago. Alfalfa hay averaged $179 per ton, down $2 per ton from April and $25 per ton below a year ago.

Looking at the cow side of the ledger, the May cull price for beef and dairy combined averaged $68.30 per hundredweight, up $4.30 from April, $2.70 above May 2019, but was $3.30 below the 2011 base average of $71.60 per hundredweight.

Speaking of feed costs, the USDA's latest acreage report estimates U.S. farmers planted 92 million acres to corn, up 2.31 million, or 3 percent, from a year ago but down from the March estimate of 97 million. Compared with last year, planted acreage is expected to be up or unchanged in 28 of the 48 estimating states.

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