Dairy Product Prices Gain Ground
Published: Friday, February 26, 2021
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The global dairy market continued to strengthen. The Feb. 16 Global Dairy Trade Auction saw its weighted average rise for the seventh consecutive event, up 3 percent, with all products offered in the black. The weighted average followed a 1.8 percent rise on Feb. 2, 4.8 percent on Jan. 19, and 3.9 percent on Jan. 5. The average winning price was $3,746, up from $3,614 on Feb. 2.
Gains were led by whole milk powder, up 4.3 percent, following a 2.3 percent gain on Feb. 2. Cheddar was up 2.4 percent, after a 2.3 percent gain. Butter was up 2 percent, after jumping 6.2 percent last time, and anhydrous milkfat was up 1.1 percent, following a 1.3 percent rise. Skim milk powder was up .3 percent, after slipping 1.5 percent in the last event.
StoneX Dairy Group says the GDT 80 percent butterfat butter price equates to $2.2696 per pound, up 4.5 cents from the last event, which saw a 13-cent rise. CME butter closed last Friday at a bargain $1.55 per pound. GDT Cheddar equated to $1.9357 per pound, up 4.1 cents, and compares to Friday's CME block Cheddar at $1.5375. GDT skim milk powder averaged $1.4548 per pound, up from $1.4506, and whole milk powder averaged $1.64 per pound, up from $1.5685. CME Grade A nonfat dry milk closed last Friday at $1.0925.
December commercial dairy product disappearance data shows total U.S. cheese disappearance was down from a year ago for the third consecutive month. Lower exports and domestic demand was blamed and HGD says it was the weakest December disappearance since 2016.
Butter was up for the second consecutive month, "a promising sign for demand," said HGD, "but not enough to overcome bearish fundamentals in the oversupplied market."
Total nonfat dry milk disappearance was up for the second consecutive month, thanks to strong domestic demand. Export sales sank to the lowest monthly volume since February, according to HGD.
The GDT helped propel CME cash butter higher in the President's Day holiday-shortened week and added to the previous week's 12.75 cent gain. Traders jumped the butter price 6 cents last Tuesday, 4 cents last Thursday, and 5.50 cents last Friday, hitting $1.55 per pound, up 15.5 cents on the week, highest since Sept. 22, 2020 but 26 cents below a year ago. Only nine sales were reported on the week.
Central butter production is strong due to seasonal demand and the current availability of cream, says Dairy Market News, and churning was notably active. The current weather situation in the southern U.S. had some Midwestern butter producers taking on cream that would otherwise lack a destination. Some contacts told DMN that their respective brands are moving well in the retail sector but food service demand is generally lackluster. Butter market tones are in a short term bullish push, says DMN, and prices have moved from $1.21 per pound on Feb. 1 to a Feb. 19 close at $1.55 per pound.
Western butter makers report demand for bulk and print butter is higher, compared to the last few months. Retail sales have picked up but inventories are heavy and old crop butter is readily available. While shoppers are finding deals for the butter in storage, processors say end users are looking for coverage of second and third quarter. Bulk butter orders are strong, a good sign for the upcoming months, says DMN, but the region has plenty of cream available and most churns are running full schedules. A strong winter storm in the Pacific Northwest, the week of Feb. 8, stymied some of the butter output. Heavy snows, freezing rain and power outages that weekend created challenges for shippers trying to get milk and cream to creameries, and for workers trying to get to work, says DMN.
Cheese was unchanged last Tuesday but headed south from there. The Cheddar blocks fell to $1.51 per pound last Thursday, lowest since May 12, 2020, but regained 2.75 cents last Friday to close at $1.5375, down 2 cents on the week and 23 cents below a year ago.
The barrels finished 7.75 cents lower, at $1.4125, 17.75 cents below a year ago, and 12.50 cents below the blocks. Seven cars of block traded hands on the week at the CME and 26 of barrel.
Cheese market tones remain uncertain, says DMN, though demand is strong, according to a growing number of Midwestern producers. More areas are lifting dining restrictions at restaurants and bars. Spot milk prices at midweek were slightly higher than previous weeks but still below previous years. Weather throughout the country spawned hauling delays in the Midwest, but cheese output was generally quite busy with ample milk available. Cheese inventories are not an overwhelming stressor for producers in the region, says DMN, "particularly when demand seems to have received a shot in the arm in recent weeks."
The western cheese market appears to be in the same holding pattern that it has been in the last few months. Manufacturers report that milk is ample and are running plants at or near full capacity. The storms in the Pacific Northwest, eastern New Mexico and Texas had milk handlers pushing milk to facilities that could take it. Truckers found it difficult to pick up milk on farms and transport it to their usual manufacturing facilities, some of which were running with a reduced crew. Cheese inventories are heavy and while cheese is moving well, buyers are hesitant to take on more. Uncertainty regarding the impact of further government purchases and weak food service demand are putting a damper on the market, says DMN, even as retail demand is ahead of sales from last year.
Grade A nonfat dry milk was down 2 cents on the week, finishing at $1.0925 per pound, 7.75 cents below a year ago, with 17 sales for the shortened week.
CME dry whey climbed to 55 cents per pound last Wednesday, highest since Oct. 19, 2018, but closed last Friday at 54.75 cents per pound, up a half-cent on the week and 17.75 cents above a year ago. Only two sales were reported on the week.
Return to Top of Page