The Cheddar blocks closed Friday at $1.07 per pound, up 5.75 cents, ending five weeks of losses, but 61.5 cents below a year ago. The barrels finished 4.5 cents higher at $1.05, 58 cents below a year ago. Five cars of block sold and 3 of barrel.

The blocks shot up 12 cents Monday on 2 unfilled bids and stayed there Tuesday, at $1.19, on 1 sale.

The barrels were up 4.25 cents Monday but backed down 1.25 cents Tuesday, to $1.08, on 3 sales.

The Daily Dairy Report says Monday’s jump was likely due to news that Leprino Foods will idle its Fort Morgan, Colo., facility for five days after numerous employees tested positive for COVID-19.

FC Stone says, “There appears to be some pipeline refilling going on. After weeks of slower sales and whittling down inventories, the supply chain both in the U.S. and perhaps globally for some dairy products, is running extra lean. Chinese milk equivalent imports were also up 14.8% from last year in March.”

Midwest cheese production varies but, even with widely available milk supplies, some producers, particularly those heavy on the food service accounts, are cutting back output by noticeable percentages, according to Dairy Market News. Others say retail demand is helping move cheese out the door.

Food service demand is up but far from normal, according to cheesemakers, but many are adding to storage as market prices are not feasible for selling cheese right now.

Western cheesemakers report retail sales are still above normal but do not make up the difference of lost food service sales. Food service accounts have seen some life as some restaurants pivot to take-out and drive-thru business. Delivery and frozen pizza has helped support sales, but DMN warned: “With ample amounts of milk and low prices, the pressure on cheese companies is intense.” Inventories continue to build and storage is becoming less available.

Butter fell to $1.10 per pound Thursday, lowest level in 11 years, but closed Friday at $1.1450, down 4.25 cents on the week and the seventh consecutive week of loss, and $1.1250 below a year ago. Some 28 carloads were sold last week.

Monday’s butter was unchanged but it gained 1.25 cents Monday, climbing to $1.1575.

Central butter churns continue at busy rates. Retail demand and more active buyers, due to low prices, are helping move butter but a number of contacts say they are going to limit their cream intakes, as food service accounts are doing anything but helping the situation. Food service buying did tick up week to week but remains well below normal.

Grade A nonfat dry milk finished Friday at 81 cents per pound, down 4.5 cents on the week and 23 cents below a year ago, with 18 sales reported on the week.

The powder was steady Monday but inched a quarter-cent lower Tuesday, to 80.75 cents per pound.

Spot dry whey was down a half-cent on the week, closing Friday at 38.50 cents per pound, 5.75 cents above a year ago, with 1 sale on the week.

Traders left the whey unchanged Monday and Tuesday.

Supply chain breaking

Media reports warn that the U.S. food supply chain is breaking as primarily meat packing plants are idled due to employee COVID sickness.

FC Stone’s April 28 Early Morning Update offered some perspective: “It looks like the average animal processing plant, excluding poultry, has more than twice as many production line and material handling employees as an average dairy plant.

“The averages probably hide a very skewed distribution of plant sizes, though,” says FC Stone. “Tyson’s Waterloo, Iowa, hog plant is their largest and has 2,800 employees while their Logansport, Ind., plant has 2,200 employees. The JBS cattle plant in Greeley, Colo., has 6,000 employees. Not all of these would be production line material handling, but a large percentage would be.”

FC Stone adds that “the new cheese plant in St. Johns, Mich., will be one of the biggest in the country but will only have about 290 employees at the plant. In 2011, the Hilmar Dalhart, Texas, cheese plant had about 250 employees operating a very large plant.

“We’re not saying dairy plants are immune or we won’t see some shutdowns due to an outbreak,” FC Stone concludes, “but the slaughter plants look a lot more vulnerable than the dairy plants.”

Storage stretched

Reports of growing dairy product surpluses looking for storage challenge the industry in what has become a perfect storm of rising spring flush milk production and pummeled consumer demand from shuttered restaurants and educational institutions. While that wasn’t quite the story in the March Cold Storage report, it likely will be seen next month.

U.S. butter stocks hit 309.6 million pounds on March 31, up 7.7 million pounds or 2.6% from February and 39.9 million or 14.8% above those a year ago.

American cheese totaled 775.1 million pounds, down 3.1 million pounds or 0.4% from February and 9.6 million pounds or 1.2% below a year ago.

Stocks in the “other” cheese category jumped to 575.2 million pounds, up 15.4 million pounds or 2.8% from February and 7.1 million or 1.2% above a year ago.

The total cheese inventory stood at 1.373 billion pounds, up 11.3 million pounds or 0.8% from February, but 10.96 million pounds or 0.8% below March 2019, the seventh consecutive month total cheese stocks were below those of a year ago.

More milk

The March Milk Production report showed larger than expected milk output, according to FC Stone broker Dave Kurzawski in the April 27 “Dairy Radio Now” broadcast, but the Cold Storage report was a “bullish surprise” for cheese and butter, as inventories were lower than expected. He said that was likely due to sharp retail demand from shelter-in-place orders enacted the last week to 10 days of March.

Storage is dairy’s No. 1 price risk right now, he said, and while there are some positive signs in food service demand, he warned that, hopefully, dairy will not follow what happened with the oil market, going into negative territory due to a lack of storage capacity.

Kurzawski doesn’t see that happening in dairy as the low prices are starting to move product.

“We have government intervention programs, dairy farmers are reducing milk output, and we have some better exports,” he concluded.

Culling down

Dairy cow culling jumped in March but was down from a year ago, according to the USDA’s latest Livestock Slaughter report. An estimated 288,000 head were sent to slaughter under federal inspection in March, up 21,900 head or 8.2% from February but 14,400 head or 4.8% below March 2019. A total of 852,600 head were culled in the quarter, down 27,200 head or 3.1% from 2019.

Year-end slaughter data showed 3.22 million dairy cows were retired from the dairy business in 2019, up 71,200 head from 2018 or 2.3%.

Class I loses $3.69

The May Federal order Class I base milk price was announced at a lowly $12.95 per hundredweight, down $3.69 from April, $3.47 below May 2019, and the lowest it has been since November 2009. It equates to $1.11 per gallon.

The Class I average stands at $16.72, up from $15.72 a year ago and $14.32 in 2018.

Price support sought

Dairy cooperatives have requested the deputy administrator of USDA’s Agricultural Marketing Service call an emergency hearing to amend Federal Milk Market Orders and establish a minimum Class I milk price mover of $15.68 per hundredweight for the months of June, July and August. This letter represented 23 dairy cooperatives across the country.

Meanwhile, the Small Business Administration resumed accepting loan applications for the Paycheck Protection Program on Monday from approved lenders on behalf of any eligible borrower.

National Milk says, “Dairy farmers are eligible to apply for the PPP, along with a separate initiative, Economic Injury Disaster Loans, for which the application window is also imminent. Both initiatives are first-come, first-served, and funds are expected to be depleted quickly after Congress replenished them last week.”