Lee Mielke

Lee Mielke

MIELKE MARKET

LYNDEN — The Agriculture Department announced the December Federal order Class III milk price at $18.36 per hundredweight, up 33 cents from November, $2.64 above December 2020, and the highest Class III since May. That put the year’s average at $17.08, down from $18.16 in 2020, and compares to $16.96 in 2019. 

Friday’s Class III futures settlements portended a January price at $20.29; February, $21.43; and March at $21.24 per cwt.

The December Class IV price is $19.88, up $1.09 from November, $6.52 above a year ago, and the highest Class IV price since October 2014. The 2021 Class IV average is $16.09, up from $13.49 in 2020, and compares to $16.30 in 2019. 

Meanwhile, cash cheese and butter started 2022 skyrocketing and saw some expanded trading limits, but then reversed gears as traders absorbed the November Dairy Products report.

After jumping 10.75 cents the previous week, the Cheddar blocks marched to $2.0650 per pound Wednesday, highest since Nov. 12, 2020, but were offered lower Thursday, first slippage since Dec. 20, dropped 5.50 cents Friday, and closed at $1.9950, up 1.50 cents on the week and 7.75 cents above a year ago when they jumped 26.75 cents to $1.9175.

The barrels climbed to $1.8725 Wednesday, highest since Nov. 12, 2020, but finished the first Friday of 2022 at $1.8650, 15.50 cents higher on the week and 21.25 cents above a year ago. They also narrowed the spread to 13 cents.

Sales for the week totaled five cars of block and four of barrel at the CME.

Dairy Market News says cheese demand requests have already met contacts’ recent expectations, as customers return to the fold.

Midwestern cheesemakers say orders are strengthening but production rates vary from plant to plant as employee numbers range from adequate to short. Spot milk was still priced at holiday level accessibility, and similar to previous week discounts, although a number of contacts expect those discounts to dissipate after this week. 

Cheese demand is steady in western retail markets, while food service demand is, reportedly, increasing. Educational institutions’ purchasing is picking up as schools reconvene.

International demand is unchanged. Port congestion and a shortage of truck drivers continues to cause delays.

Severe weather in parts of the West was causing further delays, both to loads of cheese and supplies. Milk availability is increasing in the region, though some cheese makers report that snow was slowing delivery of production supplies.

Cheese output is steady to lower as delays to those supplies and ongoing staffing shortages are preventing plants from running full schedules.

After gaining 36 cents the previous two weeks, CME butter soared to the highest price it has seen since Dec. 9, 2015, closing Friday at $2.7425 per pound, up 29 cents on the week and $1.3625 above a year ago. Twenty-six cars sold on the week. The highest CME price ever was $3.1350 per pound set on Sept. 25, 2015.

Butter churners tell DMN that cream availability has slimmed down and quickly. Multiples have climbed roughly 10 points week to week in some cases, and haulers are tight as well.

Butter churning is expected to slow if this trend continues, which is likely while cream cheese producers and other cream end users play catchup and siphon cream from the pool.

Bulk butter is very tight, says DMN, and domestic butterfat values are increasing rapidly. 

Cream has become more available in the West in recent weeks however some processors are having difficulty getting it due to severe weather and a shortage of truck drivers. Demand for cream is increasing in the region.

Butter demand is unchanged in retail and food service and international demand remains steady, despite port congestion delays.

Spot availability is limited; unsalted butter is more difficult to obtain than salted. Contacts cite strong demand and tight inventories for the higher prices.

Butter output is steady, though some butter makers say that delayed deliveries of production supplies are limiting their production.

Grade A nonfat dry milk closed Friday at $1.71 per pound, up 5.50 cents on the week and 52 cents above a year ago, with 21 sales reported.

CME dry whey closed Friday at 75.75 cents per pound, another new record high, up 0.75 cents on the week and 25.75 cents above a year ago, on 1 sale.

Speaking in the Jan. 10 Dairy Radio Now broadcast, HighGround Dairy’s Lucas Fuess said concern remains among traders regarding weaker milk production here in the U.S. and key areas around the world.

He added that, when we see the strength in Class IV products like nonfat dry milk, it lends support to cheese as well. Hopefully, with Class IV prices being as strong as they are, the higher Class III milk prices will find their way to dairy farmer pocketbooks.

The first Global Dairy Trade auction of 2022 inched higher with the weighted average rising 0.3%, after slipping 1.5% on Dec. 21, first decline since August 3.

Cheddar did the heavy lifting, jumping 4.9%, after inching 0.5% higher on Dec. 21, biggest gain since Nov. 2.

Buttermilk powder and skim milk powder were both up 1.0%, after skim milk powder inched 0.6% higher last time. Whole milk powder was unchanged, after dropping 3.3%. Butter was up 0.3%, after a 1% gain last time, while anhydrous milkfat was off 0.7% following a gain of 0.9%.

StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.5969 per pound U.S., up just under a penny, and compares to CME butter which closed Friday at $2.7425.

GDT Cheddar, at $2.4891 per pound, was up 11.2 cents and compares to Friday’s CME block Cheddar at $1.9950. GDT skim milk powder averaged $1.7114 per pound, up from $1.6986.

Whole milk powder averaged $1.7536 per pound, down from $1.7540. CME Grade A nonfat dry milk closed Friday at $1.71 per pound.

In other trade news: U.S. dairy exports saw large gains in November. 

Cheese totaled 73.9 million pounds, up 39.9% from November 2020, strongest November on record, according to HighGround Dairy, driven by cheese moving to a variety of countries, but product to Mexico was especially impressive, up 65%. 

Butter exports totaled 7.3 million pounds, up 142.8%. Nonfat dry milk-skim milk powder totaled 168.5 million pounds, a record high for November, up 24.7%, with Mexico maintaining the number one destination, up 6%, though Mexico’s market share fell to 35.5% versus 41% last year, says HGD. Dry whey exports totaled 39.6 million pounds, up 7.7%.

Dairy margins continued to strengthen over the second half of December with surging milk prices in both Class III and Class IV more than offsetting higher projected feed costs, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.

The milk market continues to draw support from slowing production and robust demand, the MW stated, and cited the lower milk output of the November data, as well as the falling cow numbers, reporting that the dairy herd is now down 47,000 cows from November 2020 at a 15-month low.

Much of this loss has occurred in the Southwest and Pacific Northwest where poor weather, scarce feedstuffs, and more weight on the Class IV price in producer milk checks have combined to encourage herd liquidation.

The MW cited data from the USDA’s latest Cold Storage report showing November 30 butter stocks were down 67 million pounds from October and near the average drawdown over the previous five years, though larger than both 2020 and 2019.

Total cheese stocks were down 27 million or 1.9% from October, the MW concluded, the largest drawdown between the two months since 2016 with most of that decline accounted for by other cheese varieties which dropped 18.2 million pounds from October to November.