Monday’s Class III futures settlements portended a February Class III at $15.61; March, $16.54; April, $17.12; May, $17.23; June, $17.40; July, $17.49; August, $17.58; September, $17.60; October, $17.55; November, $17.43; and December at $17.19.
The January Class IV price is $13.75, up 39 cents from December but $2.90 below a year ago.
More cows, more milk
The Agriculture Department continued to raise its milk production forecasts in its World Agricultural Supply and Demand Estimates report issued this morning, again citing higher projected cow numbers for 2021.
2020 production and marketings were estimated at 223.1 billion and 222.0 billion pounds respectively, including preliminary December data, up 200 million pounds on production from the January estimate. If realized, 2020 production would be up 4.7 billion pounds or 2.15% from 2019.
2021 production and marketings were estimated at 227.4 billion and 226.3 billion pounds respectively, up 700 million pounds on production. If realized, 2021 production would be up 4.3 billion pounds or 1.9% from 2020.
The 2021 Class III milk price average was reduced on a lower expected cheese price forecast and was projected at $16.60 per cwt., down 30 cents from last month’s estimate, and compares to $18.16 in 2020 and $16.96 in 2019.
The Class IV price was also reduced, reflecting a lower butter price forecast and is expected to average $13.70, down 40 cents from last month’s estimate, and compares to $13.49 in 2020 and $16.30 in 2019.
Prices mixed
Dairy prices were mixed the first week of February, or mixed up, as traders weighed last Tuesday’s GDT and the December Dairy Products report.
The Cheddar blocks fell to $1.5350 per pound last Thursday, lowest since May 12, but jumped 10.50 cents Friday, driven by Senate passage of a very pricey stimulus bill, and closed at $1.64, up 6.50 cents on the week, reversing three weeks of decline, but 29 cents below a year ago.
The barrels finished Friday at $1.50 per pound, up 11 cents on the week and 2.25 cents above a year ago; 19 cars of block were traded last week at the CME and 14 of barrel.
Monday’s trading took the blocks up 2.50 cents on 3 trades but then tumbled 3.75 cents Tuesday, to $1.6275, on 4 cars exchanging hands.
The barrels were unchanged Monday and Tuesday, holding at $1.50, now 12.75 cents below the blocks.
StoneX Dairy’s Feb. 5 Early Morning Update stated, “With uncertain government purchases and the potential for increased foodservice business in the coming months, it seems 0.5% cheese production growth (Dairy Products report) is not enough to give cheese buyers peace of mind.”
Meanwhile, cheese contacts tell Dairy Market News that spot milk offers were quieter than in recent weeks but far from tight. Prices for spot milk remain at strong discounts. Winter weather hit the Northeast and added stress for Midwestern cheese producers who provide restaurants that will not be able to offer outdoor dining for the near term.
Western cheese is widely available and inventories are growing as cheese output also tries to keep pace with the available milk. Cheese supplies are outpacing demand as retail sales decreased following the holidays and pizza cheese demand eased, with the football season at an end. Foodservice demand has yet to see much improvement even as some areas relax COVID restrictions on restaurants. DMN says, “Government purchases can help clean up some of the cheese stocks but market observers are also wary of the impact that additional purchases can have on price volatility.”
Cash butter dropped 3.50 cents last Monday, to $1.21 per pound, lowest since May 5, but jumped 8.25 cents Tuesday, spurred by the GDT, and ended Friday at $1.2675, up 2.25 cents on the week, but 56.50 cents below a year ago, on 23 sales.
The butter was up 1.25 cents Monday and added 0.75 cents Tuesday, hitting $1.2875.
Cream prices remain within reach for butter makers in the Central region, says DMN, but steadily growing ice cream production has multiples rising. Plant managers say cream is abundant so butter output remains busy. Food service demand is “a shell of its pre-COVID-19 self,” says DMN, but retail demand has covered some of the lost ground.
Western cream supplies are increasing seasonally and churns are on full schedules in many cases. Butter inventories are adequate for some, but heavier than anticipated for others, though domestic butter demand is described as good.
Grade A nonfat dry milk fell to $1.09 per pound last Thursday, lowest since Nov. 24, but saw a Friday finish at $1.12, down 5.25 cents on the week and 13 cents below a year ago. A whopping 60 carloads exchanged hands last week, including a single day record of 33 cars on Wednesday.
The powder inched a half-cent higher both Monday and Tuesday, hitting $1.13 per pound.
StoneX says, “The conventional wisdom this year is that the slack in domestic powder demand was balanced by strong global markets. That dynamic likely still exists, but we do wonder if price weakness, even modest price weakness, on NFDM will increase domestic usage.
Dry whey held all last week at 53.50 cents per pound, 14.50 cents above a year ago, with just 1 sale reported at the CME.
The whey was unchanged Monday but was up a half-cent Tuesday, to 54 cents per pound.
More butter, more powder
You’ll recall December milk output totaled 18.94 billion pounds, up 3.1% from December 2019. The latest Dairy Products report shows where the milk went.
Cheese output totaled 1.13 billion pounds, up 2.6% from November and 0.5% above December 2019. Output for the year totaled 13.2 billion pounds, up 0.4% from 2019.
Wisconsin produced 279.3 million pounds of that December total, up 0.9% from November and 1.2% above a year ago. California output, at 208.5 million pounds, was up 3.8% from November but 4.1% below a year ago. Idaho, with 85.5 million pounds, was up 2.7% from November but 3.8% below a year ago.
Italian type cheese totaled 484.7 million pounds, up 5.9% from November and 0.3% above a year ago. YTD Italian was at 5.6 billion pounds, down 1.2%.
American type cheese totaled 461.1 million pounds, up 2.9% from November and 1.0% above a year ago. YTD American hit 5.3 billion pounds, up 2.1%.
Mozzarella output, at 373.1 million pounds, was down 2.8% from a year ago, indicative of lagging pizza sales. YTD mozzarella was at 4.4 billion pounds, down 1.7% from 2019.
Cheddar, the cheese traded at the CME, climbed to 334.2 million pounds, up 14 million pounds or 4.4% from November and 3.8 million or 1.2% above a year ago. Cheddar for the year totaled 3.84 billion pounds, up 2.7% from 2019.
Churns produced a whopping 205.5 million pounds of butter, up 32.3 million pounds or 18.7% from November’s total which was revised up 4.9 million pounds, and was a bearish 21.7 million pounds or 11.8% above a year ago. Butter output for the year totaled 2.1 billion pounds, up a hefty 6.6% from 2019.
Yogurt production totaled 355.5 million pounds, up 1.9% from a year ago, with the YTD total at 4.5 billion pounds, up 2.4%
Dry whey totaled 81.7 million pounds, up 12.3 million or 17.7% from November and 1.9 million or 2.3% above a year ago, with YTD at 956.2 million pounds, down 2.2%.
Dry whey stocks fell to 65.7 million pounds, down 2.2% from November and 8.0% below those a year ago.
Nonfat dry milk output jumped to a bearish 204.5 million pounds, up 45.3 million pounds or 28.5% from November and 39.6 million or 24.1% above a year ago. Powder production for the year hit 1.94 billion pounds, up 5.0% from 2019.
Stocks, at 283.3 million pounds, were up 34.3 million pounds or 13.8% from November and a bulging 35.9 million pounds or 14.5% above a year ago.
Skim milk powder production fell to 40.9 million pounds, down 11.5 million pounds or 21.8% from November and 24 million pounds or 36.9% below a year ago. YTD skim milk powder hit 603.5 million pounds, up 5.4% from 2019.
Dairy exports record high
U.S. dairy exports showed some red ink in December, mostly on powder, and were at a 16-month low representing just 14.1% of U.S. milk output.
However, exports for all of 2020 hit a record high, despite the pandemic, with about 16% of U.S. milk output sent sailing and the value of those exports topped $6 billion, highest level since 2014.
December butter exports totaled 6.4 million pounds, up 164.8% from December 2019 and up 13.8% for the year. Butter exports were the highest since May 2018 and the strongest December volume in seven years, according to HighGround Dairy. The top destinations were Canada and Bahrain, with exports to Mexico the strongest in eight years, though a distant third to Canada and Bahrain.
December butter imports totaled 5.3 million pounds, up 48.5% from a year ago, but were down 5.9% year to date.
Cheese exports totaled 57 million pounds, down 1.0% from a year ago and off 0.5% for the year. Cheese imports, at 36.1 million pounds, were up 16.5% from December 2019, but down 8.4% year to date.
Nonfat dry milk-skim milk powder exports amounted to 129.7 million pounds, down 14.7% from a year ago, though year to date was up 15.5% from 2019.
HGD says “nonfat dry milk volumes fell below prior year for the second consecutive month but strength throughout nearly every other month in 2020 meant a record year nonetheless. Following 10 months of gains, the prior 2 months of losses were driven by a slowdown to Southeast Asia. December exports to the region were the lowest since August 2019. There were also notable losses into South America but shipments to Mexico were up slightly.”
The Feb. 5 Daily Dairy Report pointed to the lack of available shipping containers as a possible explanation for the December shortfalls.
Dry whey did well, exports totaling 37.8 million pounds, up 36.6% from a year ago and up 39.0% year to date. HGD says China took on 53% market share, with increased volumes also going Vietnam.
