Monday Morning Huddle
8 February 2021

Highlights From Last Week

Cheese Climbs on Friday After Falling to Lowest Price Since May

The CME spot block Cheddar value showed weakness throughout most last week and fell to a fresh low of $1.5350 per pound on Thursday, the lowest price since May. However, a slightly bullish Dairy Products report that showed lower Cheddar production than expected in December sent CME futures market values higher on Thursday afternoon, with gains following at the spot market on Friday morning. The 10.5 cent Friday increase was the largest single-day market climb since January 7. 19 loads traded hands as buyers returned to the market to capitalize on the lows, well above the prior week when there were no block Cheddar trades. In barrels, the price found strength into the end of the week as well and settled 11 cents higher versus the prior week on Friday.

While cheese production was lower than anticipated, the Dairy Products report showed robust butter and nonfat dry milk output into the end of last year as milk flowed steadily into Class IV plants. It was the strongest December butter production on record; on a year-to-date basis, volume exceeded two billion pounds in a calendar year for the first time in history. Combined nonfat dry milk/skim milk powder production surged to the highest monthly output in decades, while stocks climbed for the third consecutive month. Shipping issues are hindering exports, with the nonfat dry milk price declining so far this month as concerns mount that product will not be able to be moved offshore in the coming weeks.

2020 Marks Record Year for US Dairy Export Volume

Despite pandemic disruption and trade uncertainty, US dairy exports climbed to a record high in 2020. 16% of total US milk production was sent abroad last year, while the value of exported products climbed to the highest since 2014. In December, butter exports increased to the highest recorded since May 2018 as Canada and Bahrain demand increased. Nonfat dry milk volumes fell below prior year for the second consecutive month but strength throughout nearly every other month in 2020 meant a record year nonetheless. Inventory rebuilding in China kept dry whey shipments higher versus prior year for the 11th consecutive month with China claiming 53% market share in December.

Last Week’s Reports & Analysis

December 2020 Dairy Products Analysis
Total cheese output was slightly higher versus prior year into December, aligned with the gain seen in November. However, considering the robust milk production in the month, it was surprising that output was not considerably stronger. It was… Full Report

November 2020 EU-27 + UK Dairy Export Volume Supplemental Analysis
November marked the 13th consecutive month of weaker skim milk powder exports, with shipments the lowest for the month since 2016. Year to date volume has… Full Report

Reports This Week

World Agricultural Supply and Demand Estimates – Tuesday, February 9
Crop Production – Tuesday, February 9
Weekly EU Dairy Commodity Prices – Wednesday, February 10
National Dairy Products Sales Report (NDPSR) – Wednesday, February 10
Fonterra Pre-GDT Offer Volume Analysis – Thursday, February 11
Commercial Disappearance (Dec ’20) – Thursday, February 11
USDA Dairy Market News Midpoint Prices – Thursday, February 11
USDA Weekly Dairy Cow Slaughter – Thursday, February 11

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