Monday Morning Huddle
7 December 2020

Highlights From Last Week

Block Cheese Price Weekly Average Lower for Fifth Consecutive Week

The CME spot block Cheddar price eroded further throughout the first three days of last week before finding less than a penny on Thursday and holding there to close the week down 9.5 cents versus the prior week close on November 25. Eight loads traded hands as buyers stepped in to purchase even as offers persistently ticked the market lower. The barrel price followed a similar trend with losses throughout the beginning of the week; the Friday close was down 2.25 cents versus November 25. 23 barrel loads were exchanged, one more versus the 22 loads that traded in the prior week during the holiday-shortened three day period. It was the fifth consecutive weekly average block price decline but the second consecutive barrel weekly average gain.

The steep declines seen throughout November have slowed sharply into this month as the market returned to balance, but there is further downside possible as bearish factors weigh on the market. Cheddar supplies are increasing while demand is sluggish; prices could find considerable weakness into early 2021 after holiday demand ceases. USDA reports that cheese market tones have steadied and that while considerable spot milk is available for as much as $8 per hundredweight below Class prices, cheesemakers are attempting to limit production to prevent further cheese price declines.

Opposite Cheese Weakness, Other Products Find Strength

Other products saw gains last week, an encouraging sign opposite the cheese price weakness. The dry whey price settled on Friday at $0.4625 per pound, the highest price since January 2019 as slower production coupled with strong Chinese demand causes buyers to compete for product. The butter price gained 11.75 cents in the week to reach a six-week high as holiday retail purchasing spurs demand. Bullishness was also present in nonfat dry milk, which overcame recent weakness to climb to the highest settlement since February. Persistent Asian demand, worse than expected New Zealand supply, and a weak US dollar have all contributed to recent NFDM price strength.

Last Week’s Reports & Analysis

NZ Dairy Export Volume & Production Analysis (Oct ’20)
Combined losses were slight but only because the strength in fluid milk exports offset the small reductions on nearly every other product. Q4 2019 was the strongest export quarter on record so it will be difficult to match… Full Report

US Dairy Products Report (Oct ’20)
American and Italian-style cheese production diverged sharply in October as milk flowed into Cheddar vats at the expense of Mozzarella. While the year over year Cheddar gain was not as strong as the September increase, production rose to the highest October… Full Report

Reports This Week

Weekly EU Dairy Commodity Prices – Wednesday, December 9
National Dairy Products Sales Report (NDPSR) – Wednesday, December 9
USDA Dairy Market News Midpoint Prices – Thursday, December 10
USDA Weekly Dairy Cow Slaughter – Thursday, December 10
Fonterra Pre-GDT Offer Volume Analysis – Thursday, December 10
Crop Production – Thursday, December 10
World Agricultural Supply and Demand Estimates – Thursday, December 10

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