Dairy trade got a little jolt this week following five consecutive sessions of gain in the Global Dairy Trade auction. This week’s weighted average slipped 0.9 percent. Traders brought 51.5 million pounds of product to the market, down from 55.6 million on March 1. The average metric ton price slipped to $5,039 U.S., down from the record high $5,065 of the last event.

Whole milk powder (WMP) led the descent, down 2.1 percent, after jumping 5.7 percent on March 1. Butter was down 1.8 percent, following a 5.9 percent increase, while anhydrous milkfat inched up 0.4 percent, following a 2.1 percent rise. Lactose was off 0.6 percent. Skim milk powder led the gains, up 1.6 percent, after a 4.7 percent increase, and Cheddar was up 0.3 percent after leading the gains last time, with a 10.9 percent surge.

StoneX Dairy Group said the GDT 80 percent butterfat butter price equates to $3.0791 per pound U.S., down 5.7 cents, after jumping 17.7 cents on March 1, and compares to CME butter which closed Friday at $2.7250. GDT Cheddar, at $2.9083, was up slightly after jumping 23.3 cents on March 1, and compares to Friday’s CME block Cheddar at $2.13. GDT skim milk powder averaged $2.0615 per pound, up from $2.0328. Whole milk powder averaged $2.0849 per pound, down from $2.1578. CME Grade A nonfat dry milk closed Friday at $1.86.

The biggest surprise was in WMP prices, according to Chicago-based StoneX Dairy Group, which was expecting a 7 percent increase. “Buyers could very well be reacting to higher prices and the news about shutdowns in China are bringing up concerns about demand in the near term.” A new COVID outbreak has appeared.

CME cheese headed south as well but recovered some as the industry awaited the February Milk Production report on March 21. The Cheddar blocks fell to $2.05 per pound Wednesday, but closed Friday at $2.13, still down 6 cents on the week while 34 cents above a year ago.

The barrels finished the week at $2.03, up 2 cents, 57.75 cents above a year ago, and 10 cents below the blocks. CME sales totaled 10 loads of block and 18 of barrel.

Cheese demand is steady to higher in Midwest retail and food service markets, according to Dairy Market News, but outlooks are mixed. Some traders remain bearish as U.S. cheese prices remain competitive on the global market, while others believe recent price increases will slow consumer purchasing. Spot cheese availability was unchanged this week. Contacts report that milk availability varies throughout the Midwest. Down time, at some plants in the region, has caused some milk to be available to purchasers nearby. Others are experiencing some tightness as production facilities are making use of milk supplies internally. Cheese production is steady.

Food service customers in the west have been more active recently as warmer weather and loosening COVID restrictions are having a positive impact on cheese demand. Retail is steady and export demand is strengthening, driven largely by lower U.S. prices, however port congestion and truck driver shortages continue to be issues. Cheesemakers are pulling heavily on milk supplies in the region, running busy schedules but labor shortages and delayed deliveries of production supplies continues to prevent running at capacity.

Butter climbed to $2.7350 per pound on Monday, fell to $2.70 Thursday but closed Friday at $2.7250, up 1.50 cents on the week and $1.06 above a year ago, with 17 sales on the week.

Demand for cream in the Central region is trending higher, according to DMN. Ice cream makers are pulling more cream as they ramp up production for the spring holidays and warmer weather. Butter makers are running busy schedules, utilizing available loads of cream. Some plants are running below capacity due to labor shortages. Butter demand is steady to higher in food service and unchanged in retail. Inventories are mixed. Some have sufficient stocks for the coming months, while others are working to increase their inventories.

There are plenty of clouds on the horizon; the war in Ukraine and rising inflation to name a couple. The Fed approved a 0.25 percentage point rate hike this week, first increase since December 2018, meanwhile dairy margins strengthened the first half of March, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC., as a “continued advance in milk prices more than offset the impact from higher projected feed costs.”

“Milk prices continue to be supported by strong export demand for U.S. dairy products which are competitive as global milk production remains constrained,” the MW explained. “Supply shortfalls in Oceania have fueled the global decline in milk production. January milk collections in Australia dropped 6.3 percent from last year to 714 million liters as hot, humid weather lowered milk yields resulting in the lowest January output in decades. For the season which began in July, Australia’s milk collections have lagged the prior season by 2.6 percent for the first seven months of the year.”

According to the USDA’s latest Livestock, Dairy, and Poultry Outlook, issued March 15, “The Russian invasion of Ukraine has added uncertainty to the global dairy outlook,” however “the effects for the U.S. dairy industry are mostly indirect. U.S. dairy trade with both countries has been very small. Neither Russia nor Ukraine are major global dairy exporters. Russia imports substantial quantities of dairy products, mostly from Belarus. In 2021, Argentina and New Zealand were distant second and third suppliers of dairy products to Russia. Fonterra, the leading dairy supplier from New Zealand, has suspended shipments of dairy products (mostly butter) to Russia.”

Ukraine is a major exporter of corn and wheat. Russia is a major exporter of oil, natural gas, wheat and fertilizer. Disruptions in exports from these countries could contribute to higher costs of these commodities, with both supply and demand implications for the U.S. dairy industry, the Outlook warned.

“On the supply side, higher feed, fuel, energy and fertilizer prices obviously increase costs of dairy production. Other input costs could also rise since virtually all sectors supplying the industry are affected by costs of fuel and energy. On the demand side (both domestic and foreign), to the extent that costs of dairy production are passed on to consumers in the form of higher dairy product prices, smaller quantities of dairy products may be consumed. Also, demand for dairy products could be reduced as inflation reduces consumer purchasing power. The gravity of these effects will depend upon the severity and duration of the crisis, global response to it, and many other factors that impact global dairy markets,” the Outlook concluded.

The February CPI for all food is 292.8, up 7.9 percent from 2021, according to DMN. The dairy products index is 242.4, up 5.2 percent, with fresh whole milk up 12.4 percent; cheese, up 1.9 percent; and butter, up 5.5 percent.

The March 11 Dairy and Food Market Analyst said, “Retailers have been slow to raise dairy product prices, and the Bureau of Labor Statistics data shows prices were up just 1.2 percent versus two years ago. Broader grocery store prices were up 8.6 percent, according to the DFMA.