By Lee Mielke

 World dairy prices show little sign of weakening. The Feb. 15 weighted average at the Global Dairy Trade auction jumped 4.2 percent, following the 4.1 percent gain on Feb. 1, and 4.6 percent on Jan. 18. Traders brought 61.1 million pounds of product to the market, down from 62.7 million on Feb. 1, and the average metric ton price climbed to $4,840 U.S., up from $4,630.

All products offered remained in the black led this time by skim milk powder, up 6.0 percent, following the 2.1 percent advance on Feb. 1. Whole milk powder was up 4.2 percent, after advancing 5.8 percent. GDT butter was up 5.1 percent, after a 3.3 percent rise, and anhydrous milkfat was up 1.2 percent, following a 1.4 percent advance. Cheddar was up 3.5 percent, after a 2.4 percent jump last time, and lactose rounded out the gains, up 3.4 percent.

StoneX Dairy Group said the GDT 80 percent butterfat butter price equates to $2.9588 per pound U.S., up 14.5 cents, after jumping 8.9 cents on Feb. 1, and compares to CME butter which closed Friday at $2.69. GDT Cheddar, at $2.6674, was up 8.9 cents, after gaining 6.3 cents on Feb. 1, and compares to Friday’s CME block Cheddar at $1.9875. GDT skim milk powder averaged $1.9482 per pound, up from $1.8375. Whole milk powder averaged $2.0424 per pound, up from $1.9614. CME Grade A nonfat dry milk closed Friday at $1.85 per pound.

Back on the home front, CME cheese headed higher early in the week but then slowed. The 40-pound Cheddar blocks climbed to $1.99 per pound on Tuesday, highest since Jan. 13, but closed the third Friday of February at $1.9875, up 8 cents on the week and 45 cents above a year ago.

The 500-pound barrels jumped to $1.95 per pound Monday but saw their Friday finish at $1.9350, up 2.50 cents on the week, 52.25 cents above a year ago, and a more normal 5.25 cents below the blocks. There were seven sales of block reported on the week at the CME and 14 of barrel.

Cheese production remained irregular in the Midwest, according to Dairy Market News. Some plants made it a time for updates or deep cleans and that’s been the case for a few weeks. Accessible spot milk remains somewhat mixed. The price range is not large but similar to previous weeks, slightly under to around Class III. Contacts suggest that the irregularity of cheese production is the reason some of those discounted offers are still around, as milk availability is somewhat balanced. Cheese sales have begun to steady, after fluctuations throughout the early part of 2022. Producers say sales are similar to February figures in pre-COVID years.

Food service cheese demand is picking up in the West as areas begin to loosen COVID restrictions. Retail demand is steady and export demand is strengthening due to increased interest from Mexico and Asian markets. Port congestion and a shortage of truck drivers continues to cause delays. Cheese producers in the West are running busy schedules but labor shortages prevent some of them from running full schedules, according to DMN.

StoneX warned in its Feb. 17 ‘Early Morning Update’ that demand remains mostly good for available fresh cheese and it doesn’t appear anyone has a problem finding a home for it. “But without a significant pull from the export market that we’d expect with the U.S. versus global pricing skew, the prospect of going over and staying over $2.00 for any great length of time doesn’t appear very likely.”

Word is that more cheese is becoming available domestically while the world market remains tight, according to StoneX. “When you add in a discounted U.S. cheese price to those international prices it can create more questions than answers as to where this market can go next.”

After gaining 25.50 cents the previous week, the butter shot up to $2.86 per pound Tuesday, but reversed direction Wednesday and Thursday, and closed Friday at $2.69, down 6.50 cents on the week but still $1.14 above a year ago. There were 28 carloads that exchanged hands on the week.

Butter demand reports are steady to slower week to week, DMN said. Contacts said the slower weeks are allowing them to build inventory, though spring holiday preparations are mostly wrapped up. They are now turning attention to fall demand. Current bulk butter stocks are tight. Cream is readily available and contacts said locally sourced cream is changing hands at multiples in the low-to mid-1.20s. Western cream remains accessible but hauling remains a major concern and at growing costs, according to DMN.

Demand for cream is steady in the West, as inventories continue to be available. Cream deliveries continue to face delays due to the shortage of truck drivers. Retail demand for butter is steady to lower and food service is strengthening as COVID restrictions are loosening in parts of the region. Export demand is unchanged. Spot purchasers say butter inventories are tight, but loads of unsalted butter were harder to find than salted. Churns are active in the region, but plant managers say labor shortages and delayed deliveries of production supplies continue to prevent them from running full schedules.

Grade A nonfat dry milk inched up to $1.90 per pound Monday, highest since April 15, 2014, but closed Friday at $1.85, down 4.75 cents on the week and 75.75 cents above a year ago, with 11 sales reported for the week.

U.S. nonfat prices are on par with international prices which makes U.S. product less competitive on the export market. StoneX warned that, unless global prices rise, or supply side issues persist, it could be tough for powder to push higher.

CME dry whey gained 2 cents Monday but headed south from there, ending with a Friday finish at 81 cents per pound, down 1.25 cents but 26.25 cents above a year ago. There were nine sales on the week at the CME.

StoneX warned that dry Whey looks primed for some sort of downward correction and “If this happens, it could be a heavy weight on Class III prices.”

A much-delayed study on updating Federal Market Order make allowances has been released and shows that the cost of processing most products has gone up since 2005-2006.

If these costs were adopted into current market order formulas they would knock about 83 cents per hundredweight off the Class III milk price and 95 cents off the Class IV, according to StoneX, which added that “The costs are from late 2017 to December 2020, so they don’t include the inflation that we saw in 2021. Farmers won’t be happy about their milk price dropping by 80 plus cents, so there will be some fights over this.”

December fluid milk sales were down. The USDA’s latest data shows sales of packaged fluid products at 3.9 billion pounds, down 2.6 percent from 2020.

Conventional product sales totaled 3.7 billion pounds, down 2.5 percent from a year ago. Organic products, at 242 million pounds, were down 4.1 percent, and represented 6.2 percent of total sales for the month.