Meanwhile, cash cheese prices saw little change last week at the Chicago Mercantile Exchange. The 40-pound block Cheddar closed Friday, Feb. 13, at $1.53 per pound, down a half-cent on the week and 57.5 cents below a year ago when they dropped almost 13 cents, to $2.1050. The 500-pound Cheddar barrels closed at $1.4850, up a quarter-cent on the week and 57.75 cents below a year ago. Only two cars of barrel were sold on the week in the spot market. The NDPSR-surveyed U.S. average block price hit $1.5398, down 1.8 cents, and the barrels averaged $1.5179, up 0.6 cent.
Cheese pricing is viewed by many buyers as conducive to building inventory, according to Dairy Market News (DMN). Last week was much like the prior week in Midwest cheese plants, with very strong production and most plants operating at or near capacity. Regular buyers are able to cover orders from their regular sellers.
While some plants have lower sales because of buyers pacing purchases to fill current needs, even with weekly averages having increased the last two weeks, that is not the mainstream situation, says DMN.
More plants report good sales to buyers who are interested in holding more inventories. Ongoing inventory growth has two dimensions, retail inventory and aging programs for cheddar and parmesan. Abstract concerns remain and are discussed as to export challenges and currency exchange issues looking forward several months. But for the present, production levels and cheese sales seem comfortable to most manufacturers.
Cash butter headed south last week, shedding 8.5 cents by Wednesday. But it gained back a penny Friday, Feb. 13, to close at $1.72 per pound, down 7.5 cents on the week and 5 cents below a year ago. A lot of butter found its way to the CME, with 36 loads exchanging hands on the week. NDPSR butter averaged $1.6287 per pound, up 6.5 cents.
Dairy Market News reports that Central demand is weak but picking up. As some retail orders are starting to increase, inventories have cleared out. Some manufacturers are building inventories. Cream is available.
Western buying interest is uneven. Some buyers are seeking coverage, while others are concerned that the market is overstated. Retail print orders are good ahead of the Easter/Passover needs. Bulk butter demand is mostly light. Cream supplies are available and leading to more churning, and demand into export channels has slowed as U.S. prices increase. Butter production is steady to higher. Additional milk and cream is moving to butter. Other butter producers are trying to balance output by not taking in outside cream. Butter holdings are light to moderate.
Cash Grade A nonfat dry milk saw a fourth week of strength, finishing Friday morning, Feb. 13, at $1.15 per pound, up a nickel on the week and the highest spot price since Nov. 19, 2014. It was another big week of sales as well, with 44 loads exchanging hands on the week and that following 54 loads the week before. NDPSR powder averaged $1.0194, up 4.7 cents, and dry whey averaged 55.99 cents per pound, down 1.8 cents.
Cash cheese prices have been relatively steady of late: Butter is falling, but nonfat dry milk is hot. Matt Gould, analyst with the Dairy and Food Market Analyst newsletter, explained what’s happening in the cash dairy markets in Chicago. Cheese has two opposing forces, according to Gould. Domestic demand is very strong, he explained.
"We had a milder winter, and foodservice demand has held and may be up as much as 6 percent in January. So you have demand pulling on cheese; meanwhile, on the opposite side we have cows ramping up seasonally in milk production, so we have a relative range there as those two battle it out."
Butter was steady for a long period of time with very few trades, he said, and then it jumped higher.
"Psychologically, the market was motivated by Fonterra’s forecasting a drastic drought, which brought buyers back into the market, and that was compounded by the fact that futures moved with it, so guys were buying and hedging and buying and hedging and that kept driving up the spot price."
Regarding nonfat dry milk, Gould said we have seen a sizable number of loads trade at the CME, possibly even a record number, but "Powder is moving from weak hands to strong hands, so powder inventories are extremely high and reportedly powder is even being stored in shipping containers in parking lots so those participants are coming to the market and transferring it to folks who have stronger hands, who have markets to access and ability to hold inventory."
Gould also reacted to a butter manufacturer who recently told him that "Fat is where it’s at." What he means by that is that domestic butter demand has been very hot, with December disappearance up 8 percent.
"Retailers are passing on price decreases, and consumers are loving it," he concluded.
