HighGround Dairy’s Monday Morning Huddle reported that China’s cheese demand was “certainly massive last month and reached record highs. Volumes from New Zealand were up 74 percent from a year ago and represented 55 percent of market share and a record high from that country.”

 

“China imported 1,291 metric tons from the United States during June, strongest volumes since April 2015; Second Quarter imports from the United States were up 77 percent from the prior year to 3,372 metric tons, representing 11 percent market share.”

FC Stone echoed the sentiment, reporting in the July 31 Early Morning Update that “The cheese export market this year has been growing at a good pace from the major exporters. Growth in Japanese imports over the past 12 months is up 4 percent, while South Korea is up 23 percent, number 1 and 3 largest importers respectively. Spot EU mozzarella prices are going for about $1.85 per pound, which has benefitted from the tailwind of a stronger Euro, weaker U.S. Dollar.

“The United States has been competitive in the past month with block cheddar prices well below EU prices. Also, block and mozzarella manufacturers have benefitted from the weak barrel market as that has substantially lowered the cost of their milk based off how Class III prices are calculated.”

August started with strengthening prices despite the lower Global Dairy Trade (GDT), but relapsed. The Cheddar blocks climbed to $1.7875 per pound on Aug. 1, the highest price since Feb. 2, but closed Aug. 4 at $1.6975 per pound, down 5.75 cents on the week and 11.75 cents below a year ago.

The barrels shot up 11.5 cents on Aug. 2, hitting $1.66; its highest since Feb. 8, and reduced the spread to 12.75 cents, but finished the week at $1.53, down 2.5 cents, 35 cents below a year ago when they peaked for the year at $1.88, and a still too high 16.75 cents below the blocks.

Five cars of block were sold this week and 48 of barrel. Midwest cheese producers report that milk supplies are still available but noticeably lower, according to Dairy Market News. A majority of spot milk prices range from flat market to $2 under Class III.

Food service orders are growing for specialty/traditional cheesemakers. Pizza cheese producers report sales are meeting seasonal expectations. Curd producers are still experiencing a seasonal push as state fairs are underway in the Midwest.

Many Western cheese producers report there is plenty of milk available and processing facilities are at or near full capacity.

Although some parts of the region are seeing a good balance between milk intakes and cheese production needs, a few in the mountain states report some milk being discarded due to disruptions at several plants, heavy milk supplies and the difficulty in moving milk to alternative sites. Domestic demand is solid and traders remain hopeful that exports can effectively soak up their heavy stocks.

Class III milk price down

The July Federal order Class III milk price is $15.45 per cwt., down 99 cents from June but 21 cents above July 2016 as lower cheese, dry whey, and nonfat dry milk prices pulled the benchmark lower.

It equates to $1.33 per gallon, down from $1.41 in June and compares to $1.31 a year ago. It also topped California’s comparable Class 4b cheese milk price by 16 cents, lowest differential since November, 2016 when the 4b topped the Class III by 69 cents. The seven month Class III average stands at $16.02

per cwt., up from $13.73 at this time a year ago and compares to $16.04 in 2015.

Late morning on Aug. 4, Class III futures portended an August price of $16.38; September, $16.73; October, $16.96; November, $17.00; and December at $16.86 per cwt.

The July Class IV milk price is $16.60, up 71 cents from June, $1.76 above a year ago, and the highest Class IV since November, 2015. The seven month Class IV average is $15.30, up from $13.42 a year ago and $13.62 in 2015.

California’s comparable July 4b cheese milk price is $15.29 per cwt., down 31 cents from June, but 62 cents above a year ago. The 4b seven month average stands at $15.14, up from $13.02 a year ago and $14.41 in 2015.

The July 4a butter-powder milk price is $16.41 per cwt., up 50 cents from June, $2.18 above a year ago, and the highest since November 2015. Its average now stands at $15.07, up from $13.11 a year ago and 13.42 in 2015.

GDT auction heading down

The Aug. 1 GDT auction switched gears again, heading back down as a hefty 72.2 million pounds of product made its way to event number 193, up 13.4 million pounds from the previous auction, and the largest quantity in a single auction since October 2016, according to DFA.

The weighted average for all products offered was down a surprising 1.6 percent, following a 0.2 percent uptick July 18, which reversed a 0.4 percent slip July 4. Butter and anhydrous milkfat (AMF) led the declines, both down 4.9 percent, following a 3.4 percent gain last time on butter and a 0.2 percent loss on AMF. GDT Cheddar cheese was down 4.8 percent, after a 1.6 percent gain and skim milk powder was down 3 percent, after falling 3.2 percent last time. Whole milk powder was up 1.3 percent, after it inched 0.3 percent higher July 18.

FC Stone equated the GDT 80 percent butterfat butter price to $2.5431 per pound U.S. CME butter closed Aug. 4 at $2.73. GDT Cheddar cheese equated to $1.7835 per pound U.S. and compares to Friday’s CME block Cheddar at $1.6975.

GDT skim milk powder averaged 89.20 cents per pound and whole milk powder averaged $1.4313 U.S. CME Grade A nonfat dry milk price closed Friday at 86.25 cents per pound.

Milk production increases

You’ll recall that preliminary data reported June’s 50-State milk production at 18 billion pounds, up 1.6 percent from June 2016. USDA’s latest Dairy Products report shows where that milk went.

June cheese output totaled 1 billion pounds, down 2.5 percent from May but 3.2 percent above June 2016. Year to date (YTD) output stands at 6.18 billion pounds, up 2.7 percent from a year ago.

California produced 207.2 million pounds of that cheese, down 5.7 percent from May and 0.2 percent below a year ago. Wisconsin, at 270.9 million pounds, was down 1.5 percent from May but 1.3 percent above a year ago. Idaho output hit 82.9 million pounds, up 4.9 percent from May and 2.1 percent above a year ago.

Minnesota was down 4.1 percent from May but 10.9 percent above a year ago. New York was off 3.1 percent from May but 3.3 percent above a year ago. Italian cheese totaled 448.9 million pounds, down 0.8 percent from May but 3.1 percent above a year ago, with YTD output at 2.7 billion pounds, up 1.3 percent.

Mozzarella, at 349.5 million pounds, was up 3.1 percent, with YTD at 2.1 billion pounds, up 0.7 percent. Total American type cheese hit 403.8 million pounds, down 5.3 percent from May but 3 percent above a year ago. YTD totaled 2.5 billion pounds, up 4.1 percent.

Cheddar output, the cheese traded at the CME, amounted to 288.1 million pounds, down 7.7 percent from May, but up 2.8 percent from a year ago, with YTD at 1.82 billion pounds, up 6 percent.